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REAUTHORIZATION OF THE SBIR AND STTR 

PROGRAMS 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS AND 

ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

FEBRUARY 17, 2011 

Printed for the Committee on Small Business and Entrepreneurship 

( 

Available via the World Wide Web: http://www.fdsys.gov 
(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED TWELFTH CONGRESS 

MARY L. LANDRIEU, Louisiana, Chair 

OLYMPIA J. SNOWE, Maine, Ranking Member 

CARL LEVIN, Michigan 

TOM HARKIN, Iowa 

JOHN F. KERRY, Massachusetts 

JOSEPH I. LIEBERMAN, Connecticut 

MARIA CANTWELL, Washington 

MARK L. PRYOR, Arkansas 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

KAY R. HAGAN, North Carolina 

DAVID VITTER, Louisiana 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

SCOTT P. BROWN, Massachusetts 

JERRY MORAN, Kansas 

DONALD R. CRAVINS, JR., Democratic Staff Director and Chief Counsel 

WALLACE K. HSUEH, Republican Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS

Page 

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana .................. 1 

Snowe, Hon. Olympia J., Ranking Member, and a U.S. Senator from Maine .... 11 

Brown, Hon. Scott, a U.S. Senator from Massachusetts ...................................... 40 

Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire ............................ 48 

Ayotte, Hon. Kelly, a U.S. Senator from New Hampshire ................................... 48 

WITNESSES

Wessner, Ph.D., Chalres W., Director of Technology, Innovation, and Entrepreneurship, The National Academies ............................................................... 13 

Jacobs, Ph.D., Irwin Mark, Co-Founder, Qualcomm ............................................ 25 

Silver, Matthew, Ph.D., Co-Founder and Chief Executive Officer, Cambrian 

Innovation ............................................................................................................. 40 

Hernandez, Joe, Chief Executive Officer, Signal Genetics, on behalf of the 

Biotechnology Industry Organization ................................................................. 49 

Glover, Jere, Executive Director, Small Business Technology Council ............... 55 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Ayotte, Hon. Kelly 

Testimony .......................................................................................................... 48 

Prepared statement .......................................................................................... 102 

Brown, Hon. Scott 

Testimony .......................................................................................................... 40 

Prepared statement .......................................................................................... 103 

Glover, Jere 

Testimony .......................................................................................................... 55 

Prepared statement .......................................................................................... 57 

Hernandez, Joe 

Testimony .......................................................................................................... 49 

Prepared statement .......................................................................................... 51 

Jacobs, Irwin Mark 

Testimony .......................................................................................................... 25 

Prepared statement .......................................................................................... 27 

Landrieu, Hon. Mary L. 

Testimony .......................................................................................................... 1 

Prepared statement .......................................................................................... 4 

Letter dated December 16, 2010, from James C. Greenwood to Senators 

Reid and McConnell ...................................................................................... 105 

Letter dated December 16, 2010, from Jere W. Glover to Chair Landrieu . 107 

Letter dated December 16, 2010, from Jere W. Glover to Senator Snowe .. 108 

Letter from Roy Keller to Chair Landrieu ..................................................... 109 

Letter dated December 16, 2010, from Todd O. McCracken to Chair 

Landrieu ........................................................................................................ 110 

Letter dated December 17, 2010, from Mark G. Heesen to Chair Landrieu 

and Senator Snowe ....................................................................................... 111 

Letter dated December 17, 2010, from Kathy Wyatt to Chair Landrieu ..... 112 

Letter dated December 18, 2010, from Timothy Tardibono to Senators 

Reid and McConnell and Representatives Pelosi and Boehner ................ 113 

Letter dated December 20, 2010, from Jonathan Cohen to Chair 

Landrieu ........................................................................................................ 114 
Page

IV 

—Continued 

Letter dated December 17, 2010, from Robert F. Weiss to Representative 

Pelosi .............................................................................................................. 115 

Letter dated December 17, 2010, from Scott Hauge to Representative 

Pelosi .............................................................................................................. 116 

Letter dated December 20, 2010, from James P. McNamara to Chair 

Landrieu ........................................................................................................ 117 

Silver, Matthew 

Testimony .......................................................................................................... 40 

Prepared statement .......................................................................................... 43 

Shaheen, Hon. Jeanne 

Testimony .......................................................................................................... 48 

Snowe, Hon. Olympia J. 

Testimony .......................................................................................................... 11 

Wessner, Chalres W. 

Testimony .......................................................................................................... 13 

Prepared statement .......................................................................................... 17 

Article titled ‘‘An Assessment of the SBIR Program’’ .................................... 85 
(1) 

REAUTHORIZATION OF THE SBIR AND STTR 

PROGRAMS 

THURSDAY, FEBRUARY 17, 2011 

UNITED STATES SENATE, COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, Washington, DC. 

The Committee met, pursuant to notice, at 10:06 a.m., in Room 

428–A, Russell Senate Office Building, Hon. Mary L. Landrieu, 

Chair of the Committee, presiding. 

Present: Senators Landrieu, Cardin, Shaheen, Snowe, Risch, 

Rubio, Ayotte, and Brown. 

OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, 

AND A U.S. SENATOR FROM LOUISIANA 

Chair LANDRIEU. Chairman LANDRIEU. Good morning, I would like to call this 

hearing of the Senate Small Business and Entrepreneurship Committee to order this morning. Senator Snowe is on her way, but for 

everyone’s schedule, I would like to go ahead and begin. I thank 

our witnesses for juggling their busy schedules to be here today for 

this important hearing. 

The purpose of today’s hearing is to discuss the reauthorization 

of the Federal Government’s two largest research and development 

programs for small, highly innovative companies in America, the 

Small Business Innovation and Research Program and the Small 

Business Technology Transfer Program, better known as SBIR and 

STTR. These programs, as we know, were created in 1982 and 

1992, respectively, by Senator Warren Rudman and Congressmen 

John LaFalce and Ike Skelton, and many others, but those were 

our leaders. 

Unfortunately, these programs have been operating on shortterm extensions since October of 2008, and it is a high priority for 

me, and I hope for this committee, to adopt a comprehensive, longterm reauthorization bill as soon as possible, but certainly before 

this current extension expires on May 31. The agencies of the Federal Government that participate in these programs, and the entrepreneurs who depend on their smooth operation, deserve our best 

efforts, and three-month, six-month, nine-month authorizations is 

not getting the job done. 

Of course, we are not in this mess for lack of trying. This committee under my leadership and also under the leadership of Senators Snowe and Kerry has literally tried since 2006 to get a bill 

to the President’s desk. We have compromised. We have worked. 
2 

We have met with a variety of organizations and groups, trying to 

find a path forward to provide the long-term stability and reauthorization these programs deserve, our businesses need, and our entrepreneurs in America are depending on. 

We have passed bills out of this committee and through the full 

Senate numerous times with broad bipartisan support. We have 

also successfully attached this reauthorization legislation to mustpass bills, like the Defense Authorization Act, with the help of the 

leadership of that committee. However, in December of last year, 

we were able to pass and send to the House a new compromise that 

blended the House and Senate versions as well as we could, bringing advocates together who had been divided for six years. Representatives of the two key negotiators of that compromise will testify here today, the Biotechnology Industry Organization, BIO, and 

the Small Business Technology Coalition (SBTC). 

In addition to BIO and SBTC, the compromise continues to have 

the support of the National Small Business Association, the U.S. 

Chamber of Commerce, NFIB, the National Venture Capital Association, local technology groups, and some universities, many, actually, including LSU in my home state, and Louisiana Tech, and the 

University of Akron, just to name a few, and I will submit other 

letters of support for the record. 

No other SBIR and STTR authorization bill in Congress up to 

this point has had the support of all of these organizations, so I am 

hoping with the firepower behind this particular compromise, we 

can actually get it to the President’s desk in just a few months. It 

is a delicate balance, and I really appreciate everyone’s support. 

We wanted, of course, a permanent reauthorization. We thought 

that would send a very positive signal; however, with the good 

work of Senator Coburn and others, we have agreed to an eightyear reauthorization which we think that we can live with and 

meets the goals of some sort of long-term outlook. This compromise 

will not only give small businesses the confidence to invest in these 

programs, but it will also preserve the integrity of the program 

that has a history of creating jobs in our country. 

I am going to briefly go through a few quick examples because 

I think it is worth restating for the record. In Louisiana, we are 

home to Mezzo Technologies. Mezzo received a $100,000 grant. It 

funded some new developments regarding a radiator that runs cooler, basically to help the Bradley Tank with all of its deployments 

into hot places in the world. We thought that would be very helpful. Not only has it exceeded its goals in that regard, but now this 

technology is being transferred to the racing car industry that can 

also use radiators that run much cooler, and I do not need to explain how that would work on a racetrack. 

In St. Francisville, Louisiana, R–BAT received a $100,000 SBIR 

award to jump-start their research, and these are just two examples of small businesses. I think they created suits for our Army 

and military that also used heating and cooling technology, opportunities to keep troops safe and cooler in their deployments. 

In the State of Maine, and I am sure Senator Snowe will talk 

about others, but I want to mention a small company that developed controls to monitor the accuracy in medical test results for 

leukemia patients. The Maine Molecular Quality Control firm could 
3 

not function without the SBIR program when it first started, but 

today it is completely supported by its own revenues. 

One of our witnesses today is Dr. Irwin Jacobs, co-founder of 

Qualcomm, a very famous company now, but many years ago it 

was not so famous. Dr. Jacobs, we are interested in your testimony 

explaining how this particular program was helpful and supportive 

to your firm. Until then, let me just tell attendees what the San 

Diego Chamber of Commerce said about Qualcomm. According to 

the San Diego Regional Chamber of Commerce study in 2008, 

Qualcomm’s total impact to the San Diego region was approximately $5.5 billion and has supported more than 26,000 jobs. That 

is Qualcomm’s story, and Dr. Jacobs will fill in a lot of those details. 

Maybe some of you woke up this morning and picked up an electric toothbrush. You can thank SBIR for keeping the plaque off of 

your teeth and gingivitis, too, because the SBIR program helped 

fund some initial technology that created the mechanism inside of 

those toothbrushes with grants from the SBIR program that have 

wide applications now throughout our country. 

And finally, in Huntsville, Alabama, GATR Technologies, with a 

$1.2 million grant, created an inflatable antenna which provides 

immediate emergency Internet access and cell phone coverage. I 

was personally shocked in the aftermath of Katrina to be standing 

on the platform of the Superdome with an entire region underwater 

and literally hundreds of thousands of people screaming for help, 

and the phone technology that we had just five-and-a-half years 

ago was not sufficient to organize that evacuation. 

Research like this, inflatable technologies, little balloons that can 

literally be landed in an area where there are no roads and no access by train, or when the airports shut in—Haiti comes to mind 

or other places—that can give immediate communication, these are 

the kinds of things that are being developed in this country that 

are not only life-saving measures, but they produce the kind of innovative technologies that lead to new companies, growing companies, and jobs for America. 

I am going to submit the rest of my remarks for the record and 

call on Senator Snowe, but I would like to congratulate NiFTy 

Technology in Ruston, Louisiana, on being awarded this year the 

Tibbetts Award for, of course, the founding scientists that helped 

to develop this program after 30 years of work with the National 

Science Foundation, and they, coincidentally, received the award, 

Senator Snowe, this year, so we are very, very proud of them. 

[The prepared statement of Chair Landrieu follows:] 
4 

Remarks for February 17,2011 

Small Business Committee Hearing 

"Reauthorization of the SBIR and STTR Programs" 

Good Morning. I would like to call to order this hearing of the 

Senate Committee on Small Business and Entrepreneurship. I want to 

thank the witnesses for juggling their busy schedules to be here. 

The purpose of to day's hearing is to discuss the reauthorization of 

the federal government's two largest research and development 

programs for small, high technology firms -- the Small Business 

Innovation and Research (SBIR) and Small Business Technology 

Transfer (STTR) programs. 

These programs have been living off of numerous short-term 

extensions since October 2008, and it is a priority for me get a 

comprehensive, long-term reauthorization bill to the President before the 

current extension expires on May 31 st. 

Of course, we aren't in this mess for lack of trying. This 

Committee, under my leadership, and also under the leadership of 

1 
5 

Senators Snowe and Kerry, has tried since 2006 to get a bill to the 

President to provide long-term authorization to operate these programs. 

We've passed bills out of this Committee and through the full 

Senate numerous times with broad bipartisan support. We've also 

successfully attached the reauthorization legislation to important bills, 

like the annual National Defense Authorization Acts, with the help of 

Senators Levin and former House Armed Services Chairman Ike 

Skelton. 

Most recently, in December of last year, we were able to pass and 

send to the House a compromise that blended the House and Senate bills 

bringing together advocates that had been divided for about six years. 

Representatives of the two key negotiators of that deal will testify today 

- the Biotechnology Industry Organizatin (BIO) and the Small Business 

Technology Coalition (SBTC). 

In addition to BIO and SBTC, the compromise continues to have 

the support of the National Small Business Association, the U.S. 

2 
6 

Chamber of Commerce, the NFIB, the National Venture Capital 

Association, local technology groups, and universities such as LSU, 

Louisiana Tech and the University of Akron. I will submit the letters 

of support for the record. 

No other SBIR and STTR reauthorization bill in Congress, up to 

this point, has had the support of all those communities. It is a delicate 

balance, and I fully appreciate the concessions everyone has made. 

We've compromised with an eight-year reauthorization instead of 

a permanent reauthorization. This deal will not only supply small 

businesses with the confidence to invest in these programs, but also to 

preserve the integrity of a program that has been saving approximately 

200,000 jobs each year. These programs are providing the government 

and the private sector with cost-effective technology and scientific 

solutions to challenging programs. 

Take Louisiana for example-a state well known for its seafood 

and oil industries. They are home to Mezzo Technologies. Mezzo 

3 
7 

received $99,000 in grant funding to develop the radiator that helps the 

Bradley Tank keep its engine cool. You may not realize that soldiers 

will soon have advanced technology heating and cooling system suits 

thanks to a company in the small town of St. Francisville, Louisiana, RBAT. R-BAT received more than $99,000 to jump start their research. 

These are just two simple success stories from a long list of small 

businesses with innovative ideas from the SBIR and STTR programs. 

For example, in my ranking member's home state of Maine, one 

small company developed controls that monitor the accuracy in medical 

test results for leukemia patients with a $700,000 SBIR grant. At the 

start, Maine Molecular Quality Control could not function without SBIR 

funding, but today, they are completely supported by their own 

revenues. 

One of our witnesses today is Dr. Irwin Jacobs, Co-Founder of 

Qua1comm. Through their time in the program, the company received 

roughly $1.5 million in awards. Over the last 25 years, Qualcomm's 

innovations in wireless communications technology have become the 

4 
8 

backbone of our communication infrastructure worldwide. A company 

that started with only 35 employees now has 16,000 worldwide with a 

market capitalization of $80 billion. 

Maybe you woke up this morning and picked up your electronic 

toothbrush? You can thank an SBIR grant for keeping off the plaque 

and gingivitis too. SBIR funding helped Optiva Corporation create the 

SONICARE mechanism inside electronic toothbrushes with grants 

equating $100,000 in 1995 and nearly $750,000 in 1998. 

Finally, we are able to communicate easily in disaster zones using 

technology from a small company GATR [GATOR] out of Huntsville, 

Alabama. With more than $1.2 million dollars in grant funding, GATR 

Technologies created the inflatable antenna which provides emergency 

internet access, cell phone coverage, and phone lines over satellite 

networks. We used the prototype during Katrina and it came to first 

responders' aid after the quake in Haiti. 

5 
9 

For each member of this Committee, as well as states across 

America, we find stories just like these. The SBIR and STTR programs 

fund technology that help save lives, communicate in disaster zones, 

reduce government expenses, and create jobs. These advanced 

technologies come from businesses that could have started in your 

garage. Or, they are the brain child of a scientist with a dream who took 

this program and made their dream an innovation. We find these new 

technologies thanks to a grant system that works and brings results to the 

government and private sector. 

If these stories don't impress you enough, you can ask my staff for 

more. We have a stack ofthem. 

Today, it is time to hear from some success stories, a technology 

expert who has thoroughly examined the programs' effectiveness and 

merits for continuation, and organization representatives to explain why 

their members support the program and our compromise. It's time to 

realize the importance of this program for America. It's time to 

understand why we need to give small businesses and innovators, 

6 
10 

working with universities, the confidence that this program is here to 

stay. 

I would now like to tum it over to our Ranking Member Olympia 

Snowe, for her opening statement. 

7 
11 

Chair LANDRIEU. I would now like to turn it over to Ranking 

Member Snowe for her opening statement. Then we will go right 

into the record of experts here who can talk from their perspective 

about the importance of this program. Senator Snowe? 

OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, RANKING 

MEMBER, AND A U.S. SENATOR FROM MAINE 

Senator SNOWE. Thank you, Chair Landrieu, for holding this 

hearing on these two critical programs—the Small Business Innovation Research Program and the Small Business Technology 

Transfer Program. 

We are able to accomplish much for our nation’s entrepreneurs 

through these programs and thank you again for the bipartisanship 

that has been the hallmark of this committee, and once again we 

demonstrated that with the passage of this legislation unanimously 

in the United States Senate in December. I know that we will have 

the same success this time and I am pleased we are able to work 

out a number of issues with the Senator from Oklahoma, Senator 

Coburn. 

I also want to welcome all of our distinguished panelists here 

today that certainly can speak volumes in testimony about the 

value of these programs. 

Especially with the unemployment rate hovering around nine 

percent for 21 consecutive months, it is all the more important that 

we do everything we can to give value to our small businesses and 

provide access to innovation and capital. They remain uncertain 

about the future, unable to invest, unable to access lending. So 

being able to have these programs reauthorized will help foster an 

environment of innovative entrepreneurship by directing more than 

$2 billion annually in Federal research and development funding to 

the nation’s small firms most likely to create jobs and commercialize their products. 

We know that small businesses not only are job generators, but 

as the Chair indicated, they are also our most effective innovators, 

producing roughly 13 times more patents per employee than large 

firms, patents which are at least two times as likely to be among 

the top one percent of high-impact patents. In a budgetary environment where the Small Business Administration will be required to 

do more with less spending, it is crucial that these programs, one 

of the strongest examples of a very successful public-partnership, 

be a key part of the agency’s job creation agenda. 

These programs have been front and center in improving our nation’s capacity to innovate. According to a report by the Information Technology and Innovation Foundation, SBIR-backed firms 

have been responsible for roughly 25 percent of the nation’s most 

crucial innovations over the past decade, ‘‘a powerful indication 

that the SBIR program has become a key force in the innovative 

economy of the United States.’’ 

In fact, there are a wide range of remarkable success stories, as 

demonstrated here today, from Qualcomm, which now employs 

17,500, I think started out with less than a dozen people when you 

set it up back in 1985, Dr. Jacobs, to Cambrian Innovations, which 

focuses on the next generation of energy technologies, to Fiber Materials, a company from my home State of Maine with whom I met 
12 

Tuesday. They received a Tibbetts Award, as well, in recognition of 

their contributions to the SBIR program. One of Fiber Materials’ 

many creative technologies is a heat shield used in NASA’s Stardust mission, which spent seven years in space and is now on display at the Smithsonian National Air and Space Museum. 

Regrettably, the SBIR program, as you all know, expired in September of 2008. It has been subject to a series of ten short-term 

temporary extensions since then, plaguing the program with uncertainty and potentially dissuading some of our nation’s most promising firms from participating in it. That is why Chair Landrieu 

and I had extensive negotiations and debate on the reauthorization 

of this legislation and I am pleased that we reached the consensus 

we did with our colleague, Senator Coburn, in terms of the length 

of the reauthorization. Additionally, the Chair and I worked to increase the allocation for SBIR from 2.5 percent of an agency’s extramural research and development budget to 3.5 percent over ten 

years and doubling the STTR allocation from 0.3 percent over six 

years. Our legislation would also codify increased award sizes from 

$100,000 to $150,000 for Phase 1 and from $75,000 to $1 million 

for Phase 2 in the SBIR program and apply those same levels to 

the STTR program. 

I will not go on because I think we all understand the value. We 

want to hear from our panelists. But suffice it to say we have broad 

support, as the Chair indicated. 

I would like to conclude my remarks by quoting from President 

Reagan when he signed the law establishing the SBIR program in 

1982, which I happened to cosponsor, Madam Chair, although I 

hate to date myself—— 

[Laughter.] 

But I think Mr. Glover might have been around. 

[Laughter.] 

President Reagan said, ‘‘Our nation is blessed with two important qualities that are often missing in our other societies, our spirit of entrepreneurship and our capacity for invention and innovation. These two elements are combined in the small businesses that 

dot our land.’’ Well, I think reauthorizing these programs represents a profound opportunity to reaffirm the truth in this very 

optimistic vision of America that the small business community has 

presented. 

Thank you, Madam Chair. 

Chair LANDRIEU. Thank you, Senator Snowe. 

Senator Cardin and Senator Rubio have joined us. Do you all 

have just very brief remarks? I would like to get to our panel, but 

I would love to recognize you. 

Senator CARDIN. Madam Chair, I just want to recognize Mr. Hernandez, who is from Rockville, Maryland. He is one of those companies that we are talking about that has been responsible for not 

only creating jobs, but creating innovation in the biotech field and 

it is a pleasure to have him before our committee. 

Chair LANDRIEU. Thank you, Senator Cardin. 

Senator Rubio. 

Senator RUBIO. No opening statement. 

Chair LANDRIEU. Okay. Well, let me introduce our panelists. Our 

first panelist is Dr. Charles Wessner. He is the Director of Tech-
13 

nology, Innovation, and Entrepreneurship for the U.S. National 

Academies. Dr. Wessner is recognized nationally and internationally for his expertise on innovation policy, including public-private 

partnerships, entrepreneurship, and early-stage financing. We are 

very happy to have you, Dr. Wessner. 

Dr. Irwin Mark Jacobs, Co-Founder of Qualcomm, is one of the 

world’s leaders in the next generation mobile technologies. They 

are pioneers of codivision multiple access digital wireless technology, otherwise known as CDMA. Dr. Jacobs is here to share a 

remarkable story about how the SBIR program actually helped 

Qualcomm that now employs, what, 16,000 people? 

Mr. JACOBS. A little over 17,000. 

Chair LANDRIEU. Seventeen thousand, moving up. How this program helped them to get started and have the tremendous impact 

on the private sector that they are having now. 

Dr. Matthew Silver is Co-Founder and President of IntAct Labs, 

as has been noted, which is focused on technological and business 

innovations with the potential to revolutionize their domain of applications. Dr. Silver, we thank you for being here. 

Next, Mr. Jere Glover, whose experience with SBIR is wide ranging. As a former Counsel of the House Small Business Committee, 

he directed a comprehensive set of hearings on this legislation, and 

we continue to thank Jere for the advice he is giving to this Chair 

at this time on a wide variety of issues. Thank you, Jere. 

Finally, as Senator Cardin pointed out, Mr. Joe Hernandez from 

the State of Maryland. He has received graduate degrees in molecular genetics and business administration from the University of 

Florida, is currently Chairman for Principia, a biotechnology company that manufacturers novel and proprietary molecular imaging 

agents and other treatments for cancer and other diseases. I hope 

I got that right? 

We have a very qualified panel with us this morning, and let us 

start with Dr. Wessner. Just press the button, and you might have 

to speak a little bit more closely into your microphone. 

STATEMENT OF CHARLES W. WESSNER, PH.D., DIRECTOR OF 

TECHNOLOGY, INNOVATION, AND ENTREPRENEURSHIP, THE 

NATIONAL ACADEMIES 

Dr. WESSNER. Well, please, Senator, may I first thank you for 

your kindness in inviting us to talk about our research. The research is here for anyone who—— 

Chair LANDRIEU. I wanted to point out to the committee, Dr. 

Wessner, when we say he is the expert, those are all the books that 

he has written on this program. So if any of you all have any questions about anything related to this program, you are welcome to 

ask me, but please go to Dr. Wessner or pick up one of those books, 

Senator Rubio. 

Dr. WESSNER. We would also like to recommend this if you have 

trouble sleeping at night. These would probably help you out a little bit. 

[Laughter.] 

Let me first congratulate you, if I may, Senator. You know, your 

committee and the Congress as a whole should be congratulated on 

having one of the most innovative, effective, and adaptive programs 
14 

for small business the world has ever seen. And I would particularly like to commend you for emphasizing the importance of stability to the program. I just wanted to start there. Thanks very 

much. 

Please interrupt me if you have any trouble hearing me. My son 

complains that I speak more loudly than I should, but sometimes 

in public, it is not enough. 

[Laughter.] 

One of the things that is very important for us to keep in mind, 

and I say this with great respect, but we have a tendency here to 

make references to the global economy, and then once we talk 

about legislation and programs, we get completely lost within the 

beltway. And it is really important. We have traveled recently to 

Germany, to China, to Korea. The rest of the world is spending 

really hard. I sometimes feel like we are talking about the 1930s 

and about whether we need an army. You know, we do. 

The very good news is that we have a President who has quite 

rightly focused our attention on innovation, education, and competitiveness, so we would agree, I think everyone around this table, 

that innovation is good. What is harder to keep in mind is that it 

is actually a little harder than it might seem. Why? Because there 

is what we would call a valley of death, and I am very pleased to 

note here that in no small part thanks to the work of the National 

Academies in this area, people are recognizing that this valley of 

death exists. 

We put a lot of money in federally funded research, but the problem is, when you have new ideas, they are new and they do not 

have supporters, and that exists in large corporations as well as in 

small corporations. How do you move this across the valley? 

An important point to keep in mind is you can have really good 

ideas that die. They will die because they do not have the funding. 

SBIR brings capital to transform these ideas into innovations. You 

are not done then, as the gentlemen here on my right, all of them, 

can explain. But that gets you the innovation and the product development and the start of the uptake. 

So how do we get across here? Well, the rest of the world thinks 

that the SBIR program is the greatest thing since sliced bread. I 

could put up a list of ten countries that have copied this program, 

and there is a source of dismay to us. The rest of the world is copying it, putting it on steroids, while we are debating it. 

So I also want to stress, as you were kind enough to do, Senator, 

that we have not just done—there are a lot of think tanks in this 

town and I sometimes think they should be called tanks, because 

there is not necessarily a lot of thinking that is involved. They 

make up their opinion over the weekend. They make three phone 

calls. 

We did not make three phone calls. We talked to everybody in 

town, as some of the gentlemen in this room can tell you. We 

looked for best practice. We focused on these four things. There is 

really no one we did not talk to, including the distractors to the 

program. 

We surveyed over 7,000 projects, not seven, not 20, but 7,000. We 

did 100 case studies. And these are the books that you have mentioned here. This was our principal finding for the program, and I 
15 

want to stress, this is a National Academies finding. You cannot 

just say this. There were 30 reviewers on this, 20 people on the research team, 20 people on the committee, and this is what they decided. 

The vernacular expression here is that the program works. Of 

course, one of the important things to keep in mind is that it works 

in a variety of ways for a variety of things. Its focus is where we 

hurt most. We put almost $150 billion into research. How much do 

we put into translational research? How much do we put in to pool 

things across to our companies? That is something, in all sincerity, 

we really need to work on, not just with this program but with 

other programs. As I asked Dr. Haldron in the roll-out for the 

budget, $32 billion for NIH, what do we spend to bring it to the 

market? It is stable, and you know that is important. It is large 

scale. This is really best practice. You need a portfolio of investments, as any venture capitalist can tell you. You cannot make just 

a few investments and expect to win. 

One of the key effects is it is decentralized and adaptive. When 

we first started the study, we were alarmed because everybody was 

not doing it exactly the same way, and then we realized that is 

why it works. The National Institutes of Health works very hard 

at assembling—at keeping people healthy. Part of the defense 

agencies work hard at disaggregating them when necessary. So our 

point here is that the Navy, the National Science Foundation, and 

NASA all have different things. 

The program brings in over a third new companies every year. 

This is really extraordinary. It is not captured by a small group. 

Twenty percent of the companies are created because of the 

awards, bringing things out of the research community into the 

market, its core function. It encourages partnering with the university community. This program is great for universities, and I will 

be happy to elaborate on that. 

Almost 50 percent of the firms that get awards reach the market, 

and those numbers are going up. Why are they going up? Because 

over time, more and more of these companies are, in fact, reaching 

the market. And it is also significant because SBIR is, in fact, in 

an early stage, earlier than venture capital, with risky technologies. And by the way, if I may, Madam Chairman, one of the 

key points to keep in mind, if the program ever hits 100 percent, 

it will be a bad thing. We do not want—— 

Chair LANDRIEU. I am sorry. Repeat that again, please? 

Dr. WESSNER. If the program ever hits 100 percent success rate, 

that would be a bad thing because that would mean they are making very conservative—— 

Chair LANDRIEU. Correct. 

Dr. WESSNER [continuing]. Safe, inside the box investments. 

Chair LANDRIEU. There are going to be some failures in this. 

Dr. WESSNER. There has to be. The best way I refer to it is it 

is like shooting a basketball. You have to shoot to win, and you 

cannot be disappointed if you miss a shot, especially me. I have a 

lot of experience in that. 

But when people say, does the program work, just very quickly, 

what does it mean by work? Well, it creates jobs. It helps solve 

problems for the military. Sometimes it helps solve problems—one 
16 

of our apocryphal jokes is if it makes a better nuclear trigger, we 

are really not interested in widespread commercial success. 

[Laughter.] 

Innovation success. You already mentioned the toothbrush, 

which one might smile at, but that is a $5 billion business. 

Distribution—I know this is of interest to you. One of the key 

variables for success here is application. It is tightly linked, by the 

way, to population, to the number of scientists and engineers, to 

the business environment, the level of VC activity, and above all, 

to the number and orientation of universities. Some universities 

are really into commercialization, some are not. It is important to 

note that. 

So one of our key recommendations, please, keep the program. 

Reauthorize the program. And reauthorize the program for a long 

time. 

Keep as much flexibility as you can. I would much rather you 

make a phone call to a program manager than pass a law. 

Draw from best practices, and your bill emphasizes the importance of that, and we are very pleased to note that there has been 

increased learning. One of the things a new administration, particularly in DARPA, is working hard on is shortening the cycle 

time. If we can get the cycle time, the decision time down to a few 

months rather than six months or nine months, the value of the 

program, and I am sure my colleagues here in the business world 

can emphasize that, goes up enormously. 

We need to do more in outreach. There is interesting work by 

Sidney Pandos in Silicon Valley that women-owned firms are a 

great under-utilized asset in this country. They actually have a 

higher success rate than many firms. 

We also would really emphasize the importance of funds for managing the program. As these two programs approach $3 billion a 

year, having a little money to evaluate, to assess, to know whether 

your experiments are working, to be able to check on your firms, 

is increasingly important and would get more buy-in within the 

agencies themselves. 

Should we put more money into it? This is the Academy finding. 

We cannot tell you that this is more important than the second jet 

engine for a military aircraft. We cannot tell you that it is more 

important than having troops on a cliff—on a peak in Afghanistan. 

But we can tell you that if you put more money in this program, 

it will be used effectively. 

Already, these are some of the things that are happening within 

the program as a result of the recommendations we have made. 

There has been an explosion of experimentation—— 

Chair LANDRIEU. One more minute, Dr. Wessner. 

Dr. WESSNER. You have been very kind with me already. So let 

me close by saying that SBIR is an outstanding innovation program and I would urge you with all my heart and all our expertise 

to reauthorize this program and to get this on the President’s desk 

for a sustained period of time. That stability is very important. 

Thank you very much for your patience. 

[The prepared statement of Dr. Wessner follows:] 
17 

Testimony of Charles W. Wessner 

National Research Council 

To the 

United States Senate 

Small Business and Entrepreneurship Committee 

February 17, 2011 

The Small Business Innovation Research Program 

Good morning Senator Landrieu and members of the Committee. My name is Charles 

Wessner, and I work at the National Research Council's Board on Science, Technology, 

and Economic Policy. The National Research Council is the operating arm of the 

National Academy of Sciences, National Academy of Engineering, and the Institute of 

Medicine of the National Academies, chartered by Congress in 1863 to advise the 

government on matters of science and technology. 

The Small Business Innovation Research (SBIR) program was created in 1982 through the 

Small Business Innovation Development Act. The 11 federal agencies administering the 

SBIR program disburse over $2.5 billion dollars in competitive awards to innovative small 

firms. As the SBIR program approached its twentieth year of operation, the U.S. Congress 

requested the National Research Council (NRC) of the National Academies to "conduct a 

comprehensive study of how the SBIR program has stimulated technological innovation and 

used small businesses to meet Federal research and development needs" and to make 

recommendations with respect to the SBIR program. 

The NRC study has assessed the SBIR program as administered at the five federal agencies 

that together make up some 96 percent of SBIR program expenditures. The agencies, in 

order of program size, are the Department of Defense (DoD), the National Institutes of 

Health (NIH), the National Aeronautics and Space Administration (NASA), the Department 

of Energy (DoE), and the National Science Foundation (NSF). 

Based on that legislation, and after extensive consultations with both Congress and agency 

officials, the NRC focused its study on two overarching questions. First, how well do the 

agency SBIR programs meet four societal objectives of interest to Congress? That is: 

(1) to stimulate technological innovation; 

(2) to increase private sector commercialization of innovations; 

(3) to use small business to meet federal research and development needs; and 
18 

2 

(4) to foster and encourage participation by minority and disadvantaged persons in 

technological innovation.! 

Second, can the management of agency SBIR programs be made more effective? Are there 

best practices in agency SBIR programs that may be extended to other agencies' SBIR 

programs? 

To satisfy the Congressional request for an external assessment of the program, the NRC 

analysis of the operations of the SBIR program involved multiple sources and 

methodologies. A large team of expert researchers carried out extensive NRC-commissioned 

surveys and case studies. In addition, agency-compiled program data, program documents, 

and the existing literature were reviewed. These were complemented by extensive interviews 

and discussions with program managers, program participants, agency "users" of the 

program, as well as program stakeholders. 

The study as a whole sought to understand operational challenges and to measure program 

effectiveness, including the quality of the research projects being conducted under the SBIR 

program, the challenges and achievements in commercialization of the research, and the 

program's contribution to accomplishing agency missions. To the extent possible, the 

evaluation included estimates of the benefits (both economic and non-economic) achieved 

by the SBIR program, as well as broader policy issues associated with public-private 

collaborations for technology development and government support for high technology 

innovation. 

Taken together, this study is the most comprehensive assessment of SBIR to date. Its 

empirical, multifaceted approach to evaluation sheds new light on the operation of the SBIR 

program in the challenging area of early-stage finance. As with any assessment, particularly 

one across five quite different agencies and departments, there are methodological 

challenges. These are identified and discussed in the text of the Academies' report. 2 This 

important caveat notwithstanding, the scope and diversity of the report's research should 

conttibute significandy to the understanding of the SBIR program's multiple objectives, 

measurement issues, operational challenges, and achievements. 

SUMMARY OF KEY FINDINGS 

The core finding of the study is that the SBIR program is sound in concept and effective in 

practice. It can also be improved. Currenciy, the program is delivering results that meet most 

of the Congressional objectives. 

Specifically, the program is: 

o Stimulating Technological Innovation 

IThese Congressional objectives are found in the Small Business Innovation Development Act (PL 97-219). In 

reauthorizing the program in 1992 (PL 102-564), Congress expanded the purposes to "emphasize the 

program's goal of increasing private sector commercialization developed through Federal research and 

development and to improve the Federal government's dissemination of information conceming small business 

innovation, particularly with regard to woman-owned business concerns and by socially and economically 

disadvantaged small business concerns." 

'See National Research Council, An Arsessment of the SBIR Program. C. Wessner, ed., Washington DC: National 

.,,"c.demie, Press, 2008 
19 

o Generating Multiple Knowledge Outputs. SBIR projects yield a variety of 

knowledge outputs. These contributions to knowledge are embodied in data, 

scientific and engineering publications, patents and licenses of patents, 

presentations, analytical models, algorithms, new research equipment, reference 

samples, prototypes products and processes, spin-off companies, and new 

"human capital" (enhanced know-how, expertise, and sharing of knowledge). 

o Linking Universities to the Public and Ptivate Markets. The SBIR program 

supports the transfer of research into the marketplace, as well as the general 

expansion of scientific and technical knowledge, through a wide variety of 

mechanisms. NRC surveys find that SBIR is playing an important role in linking 

universities to the market. Over a third of respondents to the NRC Phase II 

Survey reported university involvement in their SBIR project. Among those 

reporting university involvement, more than two-thirds of companies reported 

that at least one founder was previously an academic; about one-third of 

founders were most recendy employed as academics before founding the 

company; and some 27 percent of projects had university faculty as contractors 

on the project. These data underscore the significant level of involvement by 

universities in the program and highlight the program's contribution to the 

transition of university research to the marketplace. 

o Increasing Private Sector Commercialization of Innovations 

o A Commercial Enabler for Small Firms. Small technology companies use 

SBIR awards to advance projects, develop ftrtn-specific capabilities, and 

ultimately create and market new commercial products and services. 

3 

• Company Creation. Just over 20 percent of companies responding 

to the NRC Firm Survey indicated that they were founded entirely or 

partly because of a prospective SBIR award. 

• 

• 

The Decision to Initiate Research. Companies responding to the 

NRC Phase II Survey reported that over two-thirds of SBIR projects 

would not have taken place without SBIR funding. 

Providing Alternative Development Paths. Companies often use 

SBIR to fund alternate development strategies, exploring 

technological options in parallel with other activities. 

Reaching the Market. Although the data vary by agency, 

respondents to the NRC Phase II Survey indicate that just under half 

of the projects do reach the marketplace. Given the very early stage 

of SBIR investments, and the high degree of technical risk involved 

(reflected in risk assessment scores developed during some agency 

selection procedures), the fact that a high proportion of projects 

reach the market place in some form is significant, even impressive. 

o A Small Percentage of Projects Account for Most Successes. As with 

investments made in early stage companies by angel investors or venture 

capitalists, SBIR awards result in sales numbers that are highly skewed. A 

small percentage of projects will likely achieve large growth and significant 
20 

4 

sales revenues-i.e., become commercial "home runs." Meanwhile many 

small successes together will continue to meet agency research needs and 

comprise a potentially important contribution to the nation's innovative 

capability. 

o SBIR is an Input, not a Panacea. SBIR can be a key input to encourage 

small business commercialization, but most major commercialization 

successes require substantial post-SBIR research and funding from a variety 

of sources. SBIR awards will have been in many cases a major, even decisive 

input-but only one of the many contributions needed for success. 

o Using Small Businesses to Meet Federal Research and Development Needs 

o Flexible Adaptation to Agency Mission. The effective alignment of the 

program with widely varying mission objectives, needs, and modes of 

operation is a central challenge for an award program that involves a large 

number of departments and agencies. The SBIR program has been adapted 

effectively by the management of the individual departments, services, and 

agencies, albeit with significant differences in mode of operation reflecting 

. their distinct missions and operational cultures. This flexibility in program 

management and modes of operation is one of the great strengths of the 

program. 

o Meeting Agency Procurement Needs. The SBIR program helps to meet 

the procurement needs of diverse Federal agencies. At the Department of 

Defense, the Navy has achieved significant success in improving the 

insertion of SBIR-funded technologies into the acquisition process. The 

commitment of upper management to the effective operation of the program 

appears to be a key element of this success. Teaming among the SBIR 

program managers, agency procurement managers, the SBIR awardees, and, 

increasingly, the prime contractors is important in the transition of 

technologies from projects to products to integration in systems. At DoD, 

the growing importance of the SBIR program within the defense acquisition 

system is reflected in the growing interest of prime contractors, who are 

seeking opportunities to be in support of SBIR projects-a key step toward 

acquisition. ' 

o Providing Widely Distributed Support for Innovation Activity 

o Large Number of Firms. During the fourteen years between 1992 and 

2005, inclusive, more than 14,800 firms received at least one Phase II award, 

according to the SBA Tech-Net database. 

o Many New Participants. Each year, over one third of the firms awarded 

SBIR funds participate in the program for the first time. This steady infusion 

of new firms is a major strength of the program and suggests that SBIR is 

encouraging innovation across a broad spectrum of firms, creating additional 

3The growing interest of Defense prime contractors is recorded in National Research Council, SBIR and the 

Phase III Challenge ofCommcrcialization, Charles W. Wessner, ed., Washington, D.C.: The National Academies 

Press, 2007. 
21 

5 

competition among suppliers for the procurement agencies, and providing 

agencies new mission-oriented research and solutions. 

o Fostering Participation by Minority and Disadvantaged Persons in 

Technological Innovation 

o A Mixed Record. Woman- and minority-owned firms face substantial 

challenges in obtaining early-stage finance. Recognizing these challenges, the 

legislation calls for fostering and encouraging the participation of women and 

minorities in SBIR. Given this objective, some current trends are troubling. 

Agencies do not have a uniformly positive record in collecting data and 

monitoring funding flows for research by woman- and minority-owned 

fums. 

• 

• 

While support for woman-owned businesses is increasing, support 

for minority-owned fums has not increased. For example, at DoD, 

which accounts for over half the SBIR program funding, the share of 

Phase II awards going to woman-owned businesses increased from 8 

percent at the time of the 1992 reauthorization (1992-1994) to 9.s 

percent (in a program increasing in overall size) for the most recent 

years covered by the NRC Phase II Survey (1999-2001) 

The share of Phase I awards to minority-owned firms at DoD has 

declined quite substantially since the mid 1990s and fell below 10 

percent for the first time in 2004 and 2005. Data on Phase II awards 

suggest that the decline in Phase I award shares for minority-owned 

firms is reflected in Phase II. 

• Documenting and monitoring the participation by women and 

minorities is complex, given, inter alia, the variations in the 

demographics of the applicant pool. In some cases, agency efforts in 

this area have been inadequate. Agencies are encouraged to collect, 

analyze, and regularly report on this important element of the 

program. 

o Support for Woman and Minority-Principal Investigators. Beyond 

support for woman- and minority-owned fums, support for woman and 

minority principal investigators can be an important step, supporting the 

potential entrepreneurs of the future. 

SUMMARY OF KEY RECOMMENDATIONS 

The National Academies' recommendations for SBIR are intended to improve the operation 

of an already effective program. They seek to maintain, and reinforce, positive features of 

program management, such as the flexibility in approach by different agencies. They also 

identify pressing needs, e.g. for better data collection and analysis and opportunities for 

improvements in program operations in areas such as award size, cycle time, and outreach to 

minorities. 

• Retain Program Flexibility 
22 

6 

o SBA and SBIR. The SBA has oversight responsihility for the eleven SBIR 

programs underway across the federal government. The agency is to be 

commended for its flexibility in exercising its oversight responsibilities, which 

allows the agencies to adapt the program to fit their needs and methods of 

operation. This flexibility has proven fundamental to the program's success, 

and should be preserved. 

o Encourage Program Innovation. As noted above, it is essential to retain 

and encourage the flexibility that enables SBIR program management to 

innovate towards an even more effective multi-phase program. 

o Preserve the Basic Program Structure. The three phase approach of the 

SBIR program should be maintained. Proposals to "bypass" Phase I are 

neither necessary nor appropriate. Permitting companies to apply direcdy to 

Phase II would have the potential to change the program, significandy 

reducing funds for Phase 1. Such a shift does not seem necessary given the 

current flexibility in award size. 

• Conduct Regular Evaluations. Regular, rigorous program evaluation is essential 

for quality program management and accountability, and improved program output. 

Accordingly, the SBIR program managers should give greater attention and resources 

to the systematic evaluation of the program supported by reliable data and should 

seek to make the program as responsive as possible to the needs of small company 

applicants. 

o Annual Reports. Top agency management should make a direct annual 

report to Congress on the state of the SBIR program at their agency. This 

report should include a statistical appendix, which would provide data on 

awards, processes, outcomes, and survey information. 

o Internal Evaluation. Agencies should be encouraged-and funded-to 

develop improved data collection technologies and evaluation procedures. 

Where possible, agencies should be encouraged to develop interoperable 

standards for data collection and dissemination. 

o External Evaluation. Agencies should be directed to commission an 

external evaluation of their SBIR programs on a regular basis. 

• Improve Program Processes 

o Topic Definition. SBIR program managers should ensure that solicitation 

topics are broadly defined and that topics are defined from the "bottom-up" 

based on agency mission needs. 

o Project Selection. Agencies should also ensure that project selection 

procedures are transparent and flexible and are attuned to the needs of small 

businesses. 

o Cycle Time. The processing periods for awards vary substantially by agency, 

and appear to have significant effects on recipient companies. Agencies 

should closely monitor and report on cycle times for each element of the 

SBIR program: topic development and publication, solicitation, application 

review, contracting, Phase II application and selection, and Phase III 

contracting. Agencies should also specifically report on initiatives to shorten 

decision cycles. 
23 

o Pilot Programs. The agencies should be strongly encouraged to develop 

pilot programs to address possible improvements to the SBIR program. 

Agencies should equally ensure that such program modifications are 

designed, monitored and evaluated, so that positive and negative results can 

be effectively determined. 

• Readjust Award Sizes 

7 

o One-time Adjustment. The real value of SBIR awards, last increased in 

1995, has eroded due to inflation. Given that Congress did not indicate that 

the real value of awards should be allowed to decline, this erosion in the 

value of awards needs to be addressed. In order to restore the program to the 

approximate initial levels, adjusted for inflation, the Congress should 

consider making a one-time adjustment that would give the agencies latitude 

to increase the standard size of Phase I awards to $150,000, and to increase 

the standard size of Phase II awards to approximately $1,000,000. 

o Maintain Flexibility. It should be stressed that recommendations are 

intended as gilldance for standard award size,-The SBA should continue to 

provide the maximum flexibility possible with regard to award size and the 

agencies should continue to exercise their judgment in applying the program 

standard. The diversity of agency and project needs does not permit a onesize-fits-all approach. 

• Continue to Focus on Increased Private-sector Commercialization 

o Encourage Continued Experimentation. The agencies should be strongly 

encouraged to develop programs that seek to improve the commercialization 

outcomes of the SBIR program. Some agencies have sought, with the 

approval of SBA, to experiment with SBIR funding beyond Phase II in order 

to improve the commercialization potential ofSBIR funded technologies. 

NIH has substantially increased its use of supplementary awards-additional 

funding provided largely at the discretion of the program manager to help 

meet unexpected research costs. The NSF Phase IIB initiative and the NIH 

Competing Continuation Awards are positive examples that might well be 

adapted elsewhere. 

o Mission Agencies Create a Phase III Pull. By working with prime 

contractors, create mechanisms (such as the Navy's Phase IIB SBIR or Phase 

III funding with program dollars) to help bridge the "Valley of Death" 

between Phase II and application funding. 

o Multiple Winners Should be Judged on Output, Not Numbers of 

Awards. In the case of multiple award winners who qualifY in terms of the 

selection criteria, the acceptance/rejection decision should be based on their 

performance on past grants in terms of commercialization success and 

addressing agency needs, rather than on the number of grants received. 

Firms able to provide quality solutions to solicitations should not be 

excluded, a priori, from the program except on clear and transparent criteria 

(e.g., quality of research and/or commercialization performance). 

• Improve Participation and Success by Women and Minorities 
24 

8 

o Improve Data Collection and Analysis. Agencies should arrange for an 

independent analysis of a sample of past proposals from woman- and 

minority-owned firms and from other firms (to serve as a control group). 

This will help identify specific factors accounting for the lower success rates 

of woman- and minority-owned firms, as compared with other firms, in 

having theit Phase I proposals granted. 

o Extend Outreach to Younger Women and Minority Students. Agencies 

should be encouraged to solicit women and underrepresented minorities 

working at small firms to apply as principal investigators and senior coinvestigators for SBIR awards, and should track theit success rates. 

o Encourage Participation. Agencies should develop targeted outreach to 

itnprove the participation rates of woman- and minority-owned firms, and 

strategies to itnprove theit success rates based on causal factors determined 

by analysis of past proposals and feedback from the affected groups: 

• Increase Management Funding for SBIR 

o Enhance Program Utilization. To enhance program utilization, 

management, and evaluation, consideration should be given to the provision 

of additional program funds for management and evaluation. Additional 

funds might be allocated internally within the existing agency budgets, drawn 

from the existing set-aside for the program, or by modesdy increasing the 

set-aside for the program, currendy at 2.5 percent of external research 

budgets. 

o Optimize the Return on Investment. The key point is that a modest 

addition to funds for program management and evaluation are necessary to 

optimize the nation's return on the substantial annual investment in the SBIR 

program. 

o Additional Resources Could be Used Effectively. In summary, the 

program is proving effective in meeting Congressional objectives. It is 

increasing innovation, encouraging participation by small companies in 

federal R&D, providing support for small firms owned by minorities and 

women, and resolving research questions for mission agencies in a costeffective manner. Should the Congress wish to provide additional funds for 

the program in support of these objectives, those funds could be employed 

effectively by the nation's SBIR program. 

'TIlls recommendation should not be interpreted as lowering the bar for the acceptance of proposals from 

woman- and minority-owned companies, but rather as assisting them to become able to meet published criteria 

for grants at rates similar to other companies on the basis of merit, and to ensure that tbere are no negative 

evaluation factors in the review process that are biased against these groups. 
25 

Chair LANDRIEU. Thank you, Dr. Wessner. I really appreciate 

that direct and passionate testimony. 

For the members that just came in, the books in front of the Dr. 

Wessner are those that he has written on this program in terms 

of the evaluation. So we have really got some good data to guide 

the work of our committee. 

Dr. Jacobs. 

STATEMENT OF IRWIN MARK JACOBS, PH.D., CO–FOUNDER, 

QUALCOMM 

Dr. JACOBS. Good morning, Senator Landrieu, Senator Snowe, 

members of the committee. It is an honor to appear today to testify 

about the role that the Small Business Innovation Program has 

played in Qualcomm’s success. 

My name is Irwin Jacobs. I am Co-Founder of Qualcomm. I 

served as CEO and Chairman of the Board of Qualcomm until July 

of 2005, our 20th anniversary, and then as Chairman of the Board 

until March of 2009. Currently, I do serve on the Qualcomm Board 

of Directors. I also serve as Chair of the National Academy of Engineering and Chair of the Salk Institute for Biological Studies. 

Let me begin by thanking the members of this committee for the 

work that you do in promoting policies that assist the growth of 

small businesses in this country. As I will discuss further in my 

testimony, the SBIR program was among the critical factors that 

contributed to Qualcomm’s early success, those factors that took us 

from a small start-up a quarter of a century ago with a group of 

employees that fit in my den to over 17,500 employees in offices 

around the world, annual revenues of over $11.5 billion, and we are 

currently the world’s largest fabless semiconductor company serving the solar industry. Earlier this week, Qualcomm was deeply 

honored to be inducted into the Small Business Innovation Research Hall of Fame. 

We started small in July 1985 without a specific product in mind 

but with a determination to innovate in digital and wireless communications. Within a few months of our founding, while driving 

home to San Diego from a meeting in Los Angeles where we were 

consulting on a mobile satellite communications program, it struck 

me that codivision multiple access, or CDMA, which I will not try 

to explain, might provide a significant advantage for mobile communications over the more traditional digital technologies. Klein 

Gilhousen, one of our other founders, followed up and discovered 

additional compelling advantages. 

In those early days, CDMA technology was widely perceived as 

possibly promising, but risky, technology. Companies around the 

world had studied it, but then dropped it after encountering technical difficulties that they felt may never be solvable for commercial equipment, or in any case, not for a timely deployment. But we 

were able in 1989 to demonstrate by building two base stations and 

a mobile phone that required a van to drive it around that we had, 

in fact, solved a number of the critical problems. CDMA offered a 

significant increase in spectrum efficiency, that is, in the number 

of subscribers that you can fit in a given allocation of spectrum. 

With projections of accelerating user growth and with limited spec-
26 

trum, carriers offered support, and urged their manufacturers to 

work with us. 

To cover our costs in developing application specific integrated 

circuits for commercial handsets and base stations, we negotiated 

with several manufacturers for a licensing approach that provided 

an up-front payment that would get applied to development and 

then a royalty on CDMA handsets they might manufacture, should 

CDMA ever prove successful. In return, we provided them with a 

steadily growing portfolio of patterns. 

We were successful with the integrated circuits and then having 

CDMA accepted as a second generation standard, along with 

TDMA. The first CDMA network went commercial in Hong Kong 

in 1995. The next two networks, in South Korea in 1996 and then 

several networks here across the United States. 

Qualcomm provided handsets, cell phones, manufactured in San 

Diego for all of those early systems. That is, we were shipping 

phones from San Diego to Hong Kong, from San Diego to South 

Korea. Unfortunately, that has changed a little bit since. 

We have focused on advancing the technology, including, for example, high data rate wireless technology that has become the 

basis for third generation wireless, all base—— 

Chair LANDRIEU. Dr. Jacobs, I am sorry, but you have 45 seconds. Sorry. 

Dr. JACOBS. Thank you—with over one billion users. 

During its critical first five years, Qualcomm received several 

Phase 1 and Phase 2 SBIR grants that allowed us to pursue several innovative programs that otherwise would not have been possible. One involved bandwidth efficient coding techniques, another 

a method and hardware to test codes, both of which have proved 

useful in our development of CDMA. Another allowed us to develop 

an application specific integrated circuit, a first step in business 

that now brings in about two-thirds of our revenue. 

So part of our ability to succeed as a young and vulnerable pioneering company was the funding that we received through the 

SBIR program. It did support us at a very critical time in our development. We urge you to continue the program, and indeed, increase the funding. Thank you. 

[The prepared statement of Dr. Jacobs follows:] 
27 

Statement by 

Dr. Irwin Mark Jacobs 

Co-Founder 

Qualcomm 

Prepared for the hearing on 

Reauthorization of the SBIR and STIR Programs 

Before the 

U.S. Senate Committee on 

Small Business and Entrepreneurship 

February 17, 2011 

10:00 am 
28 

Introduction 

Good morning Senator Landrieu, Senator Snowe, and Members of the Committee. It is 

an honor to appear before the Senate Committee on Small Business and 

Entrepreneurship today to testify about the role that the Small Business Innovation 

Research (SBIR), program has played in Qualcomm's success. 

My name is Irwin Jacobs, and I am Co-Founder of Qualcomm. I served as CEO and 

Chairman of the Board of Qualcomm until July 2005 and as Chairman of the Board until 

March 2009. Currently, I serve on Qualcomm's Board of Directors. 

Let me begin by thanking the Members of this Committee for the work that you do in 

promoting policies that assist the growth of small businesses in this country. You are to 

be commended for your role in pursuing successful policies that have strengthened 

innovation, created jobs, and fostered innovation in the U.S. The SBIR program is one 

such example. As I will discuss further in my testimony, the SBIR program was among 

the critical factors that contributed to Qualcomm's early success - those factors that 

took us from a small startup a quarter century ago with a group of employees that could 

fit in a den to the Qualcomm of today, the world's largest fabless semiconductor 

company with over 17,500 employees in offices around the world and annual revenues 

of $11 billion. Earlier this week, Qualcomm was deeply honored to be inducted into the 

Small Business Innovation Research Hall of Fame. 

The SBIR program was important to our success. We applaud the Committee for 

holding this hearing today to learn about ways in which the SBIR program can be 

strengthened and renewed to ensure that other future success stories are possible for 

the benefit of the American people. 

2 
29 

Qualcomm Overview Today 

Qualcomm was founded in 1985 with a vision to innovate and develop advanced 

wireless services for commercial markets. Today, following through on that vision, 

Qualcomm is a world leader in developing innovative wireless technologies, including 

the 90de Division Multiple Access ("CDMA") -based and Orthogonal Frequency Division 

Multiple Access ("OFDMA") cellular technologies that are used worldwide for wireless 

voice and broadband communications and are integral to hundreds of mobile phones, 

tablets, e-readers, mobile apps, and other wireless devices and services. Qualcomm 

technology powers 3G and 4G cellular networks operated by wireless carriers 

throughout the U.S. and around the world. These carriers' networks enable hundreds of 

millions of people, in rural, suburban, and urban areas alike, to enjoy ubiquitous and 

highly advanced mobile voice and broadband data services. 

Since its inception, Qualcomm has invested more than $15.5 billion in R&D. In fiscal 

2010 alone, Qualcomm spent twenty three cents out of every dollar in revenue, or a 

total of $2.55 billion on R&D. These enormous expenditures have enabled Qualcomm 

to invent many of the wireless technologies fueling unprecedented growth in mobile 

voice and broadband services. 

In addition, Qualcomm has an extensive portfolio of U.S. and foreign patents relating to 

3G and 4G digital wireless communications technologies, and the company continues to 

file for, and be awarded, patent applications in the U.S., Europe, China, Japan, South 

Korea, Brazil, India, Taiwan and other countries around the globe. Qualcomm broadly 

licenses its technology to more than 190 handset and infrastructure manufacturers 

worldwide that make network equipment, handsets and other consumer devices and 

develop applications for cellular networks based on 3G and 4G technologies. 

Furthermore, Qualcomm's chipsets support all the major frequency bands, the full 

gamut of standardized, globally harmonized 3G and 4G wide area mobile broadband 

3 
30 

and cellular technologies, Assisted GPS (A-GPS) location tools, Bluetooth, Wi-Fi, and 

many mobile device operating systems, such as Android, Windows Phone 7, and 

Qualcomm's own Brew Mobile Platform. We produce chips that the world's leading 

phone manufacturers integrate. into their 3G devices. We're also producing chips 

based on the latest 4G Long Term Evolution (L TE) technology that remain compatible 

with existing 3G technologies to ensure wide coverage for multi-mode L TE/3G devices. 

Qualcomm currently employs people in 141 locations in over thirty countries, but the 

vast majority of our 17,500 employees are located in the United States. Our 

headquarters are in San Diego, but over the years we've opened additional facilities 

across the U.S. including in Massachusetts, New Jersey, North Carolina, Texas, 

Colorado, Georgia and Silicon Valley. We are proud to have been included yet again 

on FORTUNE's "100 Best Companies to Work For," list for the 13th consecutive year. 

Today, people the world over are interacting with each other in different ways because 

of the technologies we've created at Qualcomm. Of the 5 billion mobile subscribers 

worldwide, approximately 1 billion are using a 3G or 4G device. Mobile data usage, 

which Qualcomm's technologies were designed to enable, is growing rapidly. Last 

October, the FCC projected that mobile data usage would grow by more than 35 times 

from 2009 to 2014. Since our founding just over 25 years ago, the mobile phone used 

primarily for voice communication has become an extraordinarily powerful mobile 

computer -- the largest information platforf11 in the history of humankind - one based on 

Qualcomm's innovative CDMA technology. 

Qualcomm's Early Days 

Qualcomm began with a meeting of our seven founders in my den in San Diego in July 

1985. We started small and without any specific product in mind, but with the 

determination to innovate in digital wireless communications. Initially, we focused on 

contract research and development work. In the beginning, more than half of 

Qualcomm's business was derived from government contracts, and we spent a great 

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31 

deal of time filling out proposals for military and space projects in the southern California 

region. 1 

Within a few months of our founding, while driving home to San Diego from a meeting in 

Los Angeles where we were consulting on a mobile satellite communications program, it 

struck me that COMA might provide a significant advantage for mobile communications 

over the more traditional digital technologies, time division (TOMA), and frequency 

division (FOMA) multiple access. Klein Gilhousen, one of our other founders, followed 

up and discovered additional compelling advantages. Interestingly, COMA utilizes 

spread spectrum signaling, with early origins in military applications dating to World War 

II. Perhaps the earliest patent was granted to actress and inventor Hedy Lamarr who, 

with her pianist friend George Antheil, conceived frequency-hopping spread spectrum 

by considering transmitting a random sequence of piano notes with the sequence 

known only to the transmitter and the intended receiver. 

In Qualcomm's early days, COMA was widely perceived as possibly promising but risky 

technology. Commercializing our vision for COMA was a difficult and costly process, 

and by necessity, we sought funding from numerous sources, including from the SBIR, 

while we also searched for an application of digital satellite communications with 

commercial potential. 

We determined that the transportation industry offered the best opportunity for a nearterm commercial application. Between 1985 and 1988 the company developed a 

wireless, two-way messaging and positioning system that would enable trucking firms to 

closely track their drivers' progress while enabling drivers and dispatchers to send 

messages to each other. This effort resulted in a system named OmniTRACs. Since its 

commercial introduction in 1988, OmniTRACs, which also utilizes spread spectrum 

signaling, has grown to become the largest satellite-based commercial mobile system 

for the transportation ind ustry today. 

1 David Mock, The Qua/comm Equation, (New York: AMACOM, 2005), 32 

5 
32 

Once we had revenues from OmniTRACs, we were able to turn our attention once 

again to commercializing COMA. Companies around the world had studied it but then 

dropped it after encountering technical difficulties that they felt might never be solvable 

for commercial equipment and, in any case, not for a timely deployment. But in 1989 

we were able to demonstrate by building two base stations and a van-size mobile that 

we had solved the critical technical problems. COMA offered a significant increase in 

spectrum efficiency, that is in the number of subscribers a carrier could support in a 

given allocation of spectrum. With projections of accelerating user growth and with 

limited spectrum, carriers offered support and urged their manufacturers to work with 

us. 

To cover our costs in developing application specific integrated circuits for commercial 

handsets and base stations, we negotiated with several manufacturers a licensing 

approach that provided an upfront payment that we could apply to development and 

then a royalty on COMA handsets they might manufacture should COMA ever prove 

successful. In return, we permitted them to use our steadily growing portfolio of patents. 

We were successful with the integrated circuits and then in having COMA accepted as a 

second generation standard along with TDMA. 

The first COMA network went commercial in Hong Kong in 1995; next two networks 

became operational in South Korea in 1996; and finally several networks became 

operational across the United States. Qualcomm provided handsets manufactured in 

San Diego for all of these early systems. However, we then made a strategic decision 

to sell the handset and infrastructure divisions of Qualcomm and concentrate on 

developing integrated circuits and software that we could sell to many manufacturers. 

We also focused on advancing the technology, including, for example, high rate 

wireless data that has become the basis for 3G. 

Qualcomm's fight to gain acceptance and deployment of CDMA was not easy. The 

established industry players did not want to take on a new technology, particularly one 

that would enable new competitive manufacturers. Even after Qualcomm built and 

6 
33 

successfully demonstrated a small COMA system incorporating its solutions, a Stanford 

University professor stated that we would not succeed because our technology "defied 

the laws of physics." 

Qualcomm and the SBIR Program 

During its critical first five years, Qualcomm received several Phase I and Phase II SBIR 

grants, in all totaling approximately $1.5 million. This funding allowed us to pursue 

several innovative programs that otherwise would not have been possible. One 

involved bandwidth efficient coding techniques and another involved a method and 

hardware to test error detecting codes, both of which proved to be useful in our 

development of COMA. Another allowed us to develop an application specific 

integrated circuit, a first step in a business that now brings in about two-thirds of our 

revenue. 

The value and importance of SBIR funding at a critical point in Qualcomm's earliest 

days should not be underestimated. Cutting-edge research leads to breakthrough 

discoveries, but in order for companies to attract private funding, they need support to 

prove the feasibility of new and often risky and unproven technologies. For Qualcomm, 

SBIR provided one source of that critical start-up funding. And while it was not the only 

source of funding for us at the time, it was one of the critical "stamps of approval" that 

allowed us to successfully pursue sources of private capital. 

Furthermore, the work that we performed at the time was of interest to the Government, 

thus fulfilling one of the key goals of the SBIR program: to utilize small companies to 

perform critical research for the U.S. Government. 

By any measure, those SBIR investments by the federal government have paid 

enormous dividends to the taxpayers. Qualcomm paid federal income tax of $1.4 billion 

in FY 2010 alone, and this does not include the personal federal income taxes paid by 

the thousands of Qualcomm employees. 

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34 

Furthermore, as one of the largest employers in San Diego, Qualcomm plays a 

significant role in shaping and contributing to the dynamics of the San Diego regional 

economy. According to a San Diego Regional Chamber of Commerce study conducted 

in 2008, Qualcomm's total economic impact to the San Diego region was approximately 

$5.5 billion in 2007. Also from the same study, Qualcomm employed over 10,000 

people directly in San Diego in 2007, and money spent by Qualcomm and its 

employees created and supported over 26,000 jobs touching a variety of goods and 

services in San Diego County. As of 2007, Qualcomm was responsible for economic 

output equal to approximately 3 percent of the Gross Regional Product of San Diego 

County and supported an estimated 2.4 percent of total jobs. And of course, all of these 

numbers are much higher today, given Qualcomm's continuous, rapid growth. 

Today, the San Diego region hosts hundreds of telecommunications companies, from 

startups to leading research and development facilities of global telecom companies. 

This is in sharp contrast to what existed in 1985. Today, the telecom industry boosts 

the region's economy with thousands of high-paying jobs. Qualcomm has contributed 

to the creation of this industry cluster through both spin-ofts and partnerships with other 

companies. 

Qua/comm's Contributions to the Community 

Investments from SBIR also lead to commercialization of technologies and growth of 

companies that contribute to social development. Qualcomm is no exception. Our 

corporate culture fosters a commitment to improving the communities in which we live 

and work -- a commitment we've had from our earliest days. Social responsibility is 

taken very seriously at Qualcomm, and we strive to better both our local and global 

communities through ethical business practices, socially empowering technology 

applications, educational and environmental programs, and employee diversity and 

volunteerism. By consistently fostering a community-oriented philanthropic culture, 

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35 

Qualcomm has been recognized again and again as a responsible, globally oriented 

corporate citizen. Below, please find a few highlights of those efforts: 

• Community involvement. We are dedicated to developing and strengthening 

communities worldwide and believe that involvement with community 

organizations is an important avenue for our employees to develop as 

professionals and as citizens. Since 2000, Qualcomm has donated over $165 

million to education programs and institutions, health and environmental 

initiatives, and arts and cultural organizations. Qualcomm employees participate 

in hundreds of organizations and donate thousands of volunteer hours and 

energies to causes, programs and organizations that are important to them. Our 

employees also generously contribute personal financial donations to a wide 

variety of nonprofit organizations which are matched by the company. One 

hundred percent of our executive leadership team is active in the community. 

• Support for supplier diversity: Mindful of our roots as a small business, 

Qualcomm strives to support small business today. Implemented in 2006, our 

supplier diversity program currently has 563 small and diverse businesses 

registered. 

• Corporate sustainability: We are committed to energy efficiency, renewable 

energy and sustainable best practices to reduce our carbon footprint. Our 

investments in energy efficiency have yielded nearly $3 million in annual savings, 

and our conservation efforts have resulted in 18.08 million gallons of water saved 

each year. 

• Employee education and training: With nearly 1,800 work/life balance programs, 

services and events available to our employees, along with close to 50,000 

enrollments in training courses each year, we strive to create a supportive 

workplace for our employees. 

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36 

• Wireless Reach. Qualcomm believes access to 3G and next-generation mobile 

broadband technologies can improve people's lives. Qualcomm's Wireless 

Reach TM initiative is a strategic program that brings wireless technology to 

underserved communities globally. By working with partners, Wireless Reach 

invests in projects that foster entrepreneurship, aid in public safety, enhance the 

delivery of health care, enrich teaching and learning and improve environmental 

sustainability. Wireless Reach creates sustainable 3G projects through 

partnerships with non-governmental organizations, universities, government 

institutions, development agencies and other private sector companies. 

Formalized in 2006, Wireless Reach now has collaborations with over 100 

partners on 66 projects in various stages of development in 29 countries. 

At this critical juncture for the SBIR, it's important to look back and evaluate whether the 

program has fulfilled its mission. Certainly in the case of Qualcomm, the answer would 

have to be a resounding "yes." SBIR provided the needed seed funding for a fledgling 

enterprise, a conduit so that Qualcomm's engineers could share their expertise with the 

Government on key research of national interest, and an unofficial "certification" that 

helped us to secure private capital. For all of these reasons, the SBIR/Quaicomm 

partnership was an unequivocal success. 

Other Policies to Foster Innovation 

Innovation & IP 

Innovation provides America's chief competitive edge in our increasingly global 

economy. For our economic well-being and that of our children, grandchildren and 

generations to come, we must maintain - indeed, strengthen - the incentives that drive 

innovation. 

A key driver of innovation is the American system of risk and reward. And while much 

of that resides in the private sector, government has a critical role to playas well. As 

10 
37 

this testimony has described, from its inception, Qualcomm sought to challenge 

conventional thinking about wireless communications and break new ground - an 

inherently risky business. Later, after becoming a public company, Qualcomm's 

shareholders allowed us to continue to take risks based on their confidence that, if we 

innovated successfully, the strong U.S. patent system would enable us to protect our 

inventions and earn an appropriate return on the investment of time, sweat and money. 

If we make the wrong policy choices regarding intellectual property, innovation can be 

quickly stifled. Of immediate concern are proposed legislative changes to our patent 

system that could significantly weaken rights of patent owners, undermining their 

incentive to innovate. The U.S. patent system is not perfect, but I believe it functions 

well. Legislative focus should be on strengthening the PTO, including ending the 

practice of diverting PTO user fees, securing adequate funding for the PTO, and 

ensuring sufficient resources to reduce the backlog of some 700,000 pending 

applications and cut the amount of time it takes for PTO to issue or deny a patent. 

From an SBIR perspective, a weakened patent system makes the startup journey even 

more perilous. SBIR-funded innovation that cannot later be reliably protected could be 

self defeating. Let's not overlook the reality that protectable innovation equals jobs. 

Education & Access to Talent 

Government support for U.S. research universities, blended with help from corporations 

and individual donors, has been another important part of our leadership in innovation. 

Qualcomm has long had a close and symbiotic relationship with universities, which 

produce the next generation of innovators. Broadly-based, high-quality education at all 

levels is indeed central to our long-term growth and competitiveness. We should all be 

concerned by the declining performance and student interest in math and science. We 

need to do more to incentivize and support students with an interest in these subjects. 

11 
38 

Mobile technology provides an opportunity to improve the educational experience and 

we are determined to help educators and policy makers better understand this potential. 

We have a variety of projects under the umbrella of our Wireless Reach initiative that 

are bringing mobile technology to the classroom in poor urban and rural districts from 

North Carolina to California, as well as in India, Vietnam, Guatemala, and elsewhere. 

Finally, through our recruiting efforts at the college and especially the post graduate 

level, we find more and more that many of the talented engineers, programmers, 

scientists and managers are not U.S. citizens. Many foreign students would like to 

remain in the United States to work after finishing their studies, but current U.S. visa 

restrictions make that difficult. Qualcomm supports immigration reform that welcomes 

highly educated and talented professionals to our nation. 

Conclusion 

In conclusion, while it's a pleasure to outline for the Committee the technological, 

economic, and social benefits we believe Qualcomm has generated during its 25 years, 

I hope the Committee will appreciate the important role the SBIR played in our early 

beginnings. The SBIR has proven to be successful in fostering public/private 

partnerships, and providing an opportunity for entrepreneurs to continue doing what 

they love to do: innovate. Ultimately some of these recipients will evolve into Fortune 

500 companies, as we did, and the modest federal investment through the SBIR will pay 

for itself several times over in the form of economic growth, enhanced competitiveness, 

job creation and technological advancement. 

Such strategic investments by our government should not be allowed to expire. They 

should continue to be funded and, in my view, expanded. SBIR was created in the 

1980s, in response to intense national concern about the pOSition of the U.S. in the face 

of rising global economic competition. Today, such concerns are even more 

paramount. The U.S. Government must remain fully engaged in providing incentives to 

spur innovation, technologies and new products. 

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39 

Along with a continued commitment to fund basic research, a strong patent system that 

rewards innovation, investment in education, and access to talent, such investments are 

at the heart of what govemment can do to assist the private sector and drive economic 

growth. 

Thank you again for the opportunity to appear before this Committee. I look forward to 

answering your questions. 

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40 

Chair LANDRIEU. Thank you so very much. 

I see Senator Scott Brown is here, and he wanted to say a word 

about Dr. Silver. We have already generally introduced him, but 

Senator Brown? 

OPENING STATEMENT OF HON. SCOTT P. BROWN, A U.S. 

SENATOR FROM MASSACHUSETTS 

Senator BROWN. Well, first of all, Madam Chair, I want to thank 

you for your leadership on the committee and working with the 

Ranking Member. 

Dr. Silver, it is good to see you here. Dr. Silver is a small business owner and the Co-Founder and President of Cambrian Innovation from Somerville, Massachusetts, and he is here as a witness 

today. As you know, Massachusetts has a strong biotech, high tech, 

pharma presence, and a lot of these companies were started, as 

Qualcomm does, as well, with the funds that we are talking about. 

So I just wanted to welcome you. 

Dr. SILVER. Thank you. 

Senator BROWN. Thanks for taking the time to come and testify. 

I am bouncing back and forth between Armed Services and here, 

so if I leave, it is not out of disrespect. So thank you for what you 

are doing, and I am excited to be here. 

Chair LANDRIEU. Thank you, Senator. 

Dr. Silver. 

STATEMENT OF MATTHEW SILVER, PH.D., CO–FOUNDER AND 

CHIEF EXECUTIVE OFFICER, CAMBRIAN INNOVATION 

Dr. SILVER. Well, thank you very much for that introduction. 

Chairwoman Landrieu, Ranking Member Snowe, members of the 

committee, it is really a tremendous honor to be able to discuss 

with you the critical role that the committee and the SBIR program, in particular, can play in ensuring that the United States 

maintains its global leadership position in innovation. 

As a Ph.D. graduate from Massachusetts Institute of Technology, 

where I studied new models of innovation, and Co-Founder and 

CEO of Cambrian Innovation, an environmental product development firm located in Somerville, Massachusetts, I hope that my 

perspective provides a concrete example of how the SBIR program 

can help catalyze the development of an early stage firm. 

In the five years since our founding, Cambrian Innovation, formerly called IntAct Labs, has been the fortunate recipient of multiple SBIR awards, enabling accomplishments unimaginable without the program. Most importantly, we have become a viable player 

in a global race to develop next generation water and energy systems based on newly discovered biocatalytic processes, and as a result, we are now valued by our private investors at several times 

the total SBIR investment. 

In this testimony, I am going to briefly discuss our story, emphasizing three points. First, the government does have an important 

role to play in early stage innovation, particularly where there is 

high technical risk. Second, the SBIR program is a very effective 

vehicle for this role. And third, above all, the program really needs 

long-term stability, less bureaucracy, and faster decision making. 
41 

The SBIR–STTR Reauthorization Act accomplishes most of these 

needs, and I strongly support it. 

Cambrian was founded in 2006 with the vision of improving the 

way our society processes basic natural resources, starting at the 

intersection of energy and water. Treating our nation’s water currently consumes an estimated three percent of our electricity. We 

were, therefore, really inspired by recent scientific discoveries that 

suggested that some microbes could generate electricity directly 

while treating water, and we imagined a suite of products with the 

potential to change society’s relationship to water, energy, and 

fuels. 

The main trouble in 2006 was that the discovery alone was too 

immature for venture investment. Developing energy and water 

technology entails a lot of technical risk associated with scaling, 

testing, and iterating designs. Universities do not carry out this 

kind of scaling exercise. On the other hand, most venture firms and 

even angel investors shy away from taking on investments with 

very long lead times and high technical risk. 

Our solution was, in no small part, the SBIR program. After receiving an initial NASA grant in 2006 to test the applied science, 

we were awarded a USDA SBIR in 2008 to apply our product to 

agricultural wastewater treatment. The first design was actually 

not satisfactory, but the effort did yield a number of applied discoveries and a better understanding of our marketbench. Building on 

this knowledge, we have been fortunate to receive SBIR awards 

from the NSF, the EPA, and NASA in 2010 and 2011. 

Today, Cambrian is commercializing three potentially gamechanging products associated with renewable biogas generation, nitrogen removal from wastewater, and surface water sensing, and 

we are actively selling feasibility research services. Our SBIR 

awards have helped us attract foreign direct investment as well as 

hire seven employees and achieve a host of other accomplishments 

with respect to intellectual policy and partnership that I list out in 

the written testimony. 

Risks definitely remain for our firm, and we have some time to 

go before the technology is proven at the scale that we would like, 

but there is one thing that is clear. Without the SBIR program, we 

may not have even been able to take these risks in the first place. 

As a result, I venture to say that the U.S. would be further behind 

in a global race to commercialize one particular energy and water 

technology. 

Our story is just one example out of thousands of how the SBIR 

program can help an early stage company. However, as I mentioned at the beginning and as I am sure the other panelists will 

mention, we do see some room for improvement. 

First and most importantly, uncertainty about the future of the 

program makes it really difficult for small businesses to plan and 

attract outside investment. We need stability. 

Second, the time scale for agency responses is just way too slow. 

Third, all agencies should minimize bureaucracy, and I would 

suggest making immediate use of information technology to reduce 

paperwork. I am pleased that the reauthorization bill addresses 

many of these needs. 
42 

Finally, on the VC question, I must admit that I am a little bit 

concerned about opening the program to majority-owned VC firms. 

Recent statistics suggest that VC firms are beginning to scale back 

on seed stage investment, creating a gap between scientific discoveries and company formation. In this context, I do not believe that 

the government achieves its objectives by decreasing the risk of a 

downstream VC investment. To have the most impact, it should invest in high-risk, high-impact ideas where the VC firms have failed 

to invest. 

This said, the VC community, of course, plays a really vital role 

in our nation’s innovation ecosystem and the actual impact of opening the program is not yet known. I believe the 25 percent rule is 

a good compromise which I would support in the name of moving 

the bill forward. 

There is much more to say, of course, but I would like to leave 

you with one thought. If there is one thing the government can do 

to help our economy, it is lowering the cost of commercializing new 

ideas and helping to foster an atmosphere of product-focused risk 

taking. Any act involving small business should, in my opinion, 

have this as the broader goal, as it will be the key to competing 

in the global marketplace in the 21st century for both companies 

and countries. 

Thanks again for inviting me to contribute to this important 

hearing. I look forward to answering your questions. 

[The prepared statement of Dr. Silver follows:] 
43 

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44 

Cambrian Innovation LLC 

1 Introduction 

Chairwoman Landrieu, Ranking Member Snowe, members of the committee, it is a tremendous 

honor to be able to discuss with you the critical role that the government, and the SBIR program 

in particular, can play in ensuring that the United States maintains its global leadership position 

in innovation. 

As a recent PhD graduate from the Massachusetts Institute of Technology, where I studied new 

models of innovation, and founder and CEO of Cambrian InnovationTM, an environmental 

product development firm located in Somerville, Massachusetts, I hope my perspective provides 

a concrete example of how the SBIR program can help catalyze small business development, 

create jobs, and build value. In the five years since our founding, Cambrian (formerly called 

IntAct Labs) has been the fortunate recipient of six SBIR awards from four agencies, enabling 

accomplishments unimaginable without the program. I wi11list some of these shortly, but most 

importantly, we have become a viable player in an increasingly global race to develop next 

generation water and energy systems based on newly discovered bio-catalytic processes. As a 

result, we are now valued by our private investors at several times the total SBIR investment. 

In this testimony I will discuss our story, emphasizing three points: First, government has an 

important role to play in early stage innovation, particularly where there is high technical risk. 

Second, the SBIRfSTTR program is a very effective vehicle for this role. Third, for SBIRfSTTR 

to be even more effective it needs long-term stability, less bureaucracy, and faster decisionmaking. The SBIRfSTTR re-authorization act accomplishes most of these needs. 

2 The Role of SBIR in Cambrian Innovation's Story 

Cambrian was founded in 2006 with the vision of using advanced bioengineering to disrupt the 

way our society processes basic natural resources, starting at the intersection of energy and 

water. Currently, the United States produces over 38 billion gallons of wastewater every day and 

treating this water using our aging infrastructure consumes an estimated 3% of national 

electricity use. In 1999 novel scientific discoveries suggested that microbes might be able to 

generate direct electric current while treating wastewater. We imagined a broad platform of 

solutions stemming from this basic innovation, with the potential to fundamentally affect 

society's relationship to water, energy, even fuels and chemicals. 

The main trouble in 2006 was that the scientific discovery made in universities was too immature 

for venture investment. Developing energy and water technology entails a lot of technical risk. 

We needed to design a system for commercial use, prove that it would work on real industrial 

wastewater, scale it to pilot levels, build a demonstration plant, all while making engineering 

discoveries about basic process parameters that require iteration and time. Universities don't 

2 
45 

Cambrian Innovation LLC 

carry out this kind of scaling exercise. On the other hand, most venture firms and even angel 

investors shy away from taking on an investment with high technical risk. 

One might argue that large corporations can carry out these kinds of innovations. While true in 

theory, most of the literature on innovation suggests that they don't do so effectively for a host of 

reasons. Large corporations have structures that often stifle innovation, move too slowly, or even 

have incentives to stall innovation that will cannibalize existing products. In reality, most large 

corporations innovate by acquiring start-ups. 

Cambrian's solution to this problem was, in no small part, the SBIR program. After receiving a 

grant from the NASA Institute for Advanced Concepts in 2006 to demonstrate that our concepts 

worked at all, we received funding from the USDA SBIR program in 2008 to prove feasibility 

for agricultural wastewater treatment. Our first design was not satisfactory, but the effort yielded 

a number of applied discoveries and a better understanding of our market niche. This resulted in 

new SBIR awards from the NSF and EPA in 2010, and the NSF and NASA in 2011, which have 

allowed us to attract investors and develop our current product line. 

3 Benefits of SBIR for Companies and the Nation 

Today, with the help of these SBIR investments and commercial partnerships, Cambrian 

InnovationTM is commercializing four potentially game-change products. Our AquavoltTM 

product line uses electrical active bacteria in an enhanced anaerobic digester that converts dairy 

and brewery wastewater into useful gases, and we have developed a novel approach to denitrification that we estimate can save the Aquaculture industry up to 70% of the operations costs 

required to remove soluble nitrogen. We have invented and patented a new water sensor 

platform, and novel approach to aerospace life support. Six relatively small grants enabled us to: 

Attract angel and corporate foreign direct investment; 

Hire seven employees; 

File five provisional patents, two full Patent Cooperation Treaty (PCT) applications, with 

over thirteen independent claims between them; 

License outside IP; 

Develop relationships with MIT and Penn State for collaborative R&D; and 

Initiate corporate scale-up discussions with a number 01 firms. 

These accomplishments were due to funding, but they also worked in concert with an ecosystem 

of innovation such as the MIT business plan awards, and collaboration with the Penn State 

Licensing Office. Risks certainly remain for our firm, and we have some time to go before the 

technology is proven at the scale we would like. But one thing is clear - without the SBIR 

program, we could not have even taken these risks. As a result, I venture to say that the US 

would be further behind in the global race to commercialize an important clean energy and water 

technology. 

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46 

Cambrian Innovation LLC 

4 Areas For Improvement and the Need for the Reauthorization Bill 

Our story is but one example, out of thousands, of how the SBIR program can help an early stage 

company. In Cambridge, I know of many other early stage ventures, such as Ginkgo Bioworks, 

Fusion Research Technologies, Saperix, and Levant Power that have leveraged the program to 

received substantial extemal benefits. I also know of innovation services such as the Drydock 

Incubator and the Fraunhofer Tech Bridge Initiative that can multiple the effect of such 

programs. However, as I mentioned in the beginning, there is room for improvement: 

First and foremost, uncertainty around the future of the program makes it very difficult 

for small businesses to plan projects and attract investment. Permanence will increase 

effectiveness, and the Act accomplishes this. 

Second, the time-scale for agency responses is too slow. In a perfect world, the 

allocations should be made based on results. If a faster result has been obtained and 

validated, Phase II awards should be administered quickly. At the very least, responses 

should be made in three months. Section 209 of the re-authorization act seems to address 

this. 

• Third, all agencies should minimize bureaucracy and make immediate use of information 

technology to reduce paperwork. The NSF does a terrific job of this compared to other 

agencies that we have interacted with, and we would strongly advocate that all the other 

agencies adopt similarly low-paperwork contracting methods. 

In addition, sections 204 and 205, which recognize the need to provide follow-on 

commercialization readiness funding for certain grant recipients, and section 106, which enables 

flexibility between funding agencies, are good ideas for improving success. 

On the VC question, while I welcome the basic compromise as a way to bring stability to the 

program I must admit that I am somewhat concemed about opening the program to companies 

majority owned by VC firms. Recent data by the National Venture Capital Association indicates 

that in 2010 VC firms made 363 seed stage investments, versus 5,809 SBIR awards in 2009. VC 

firms are increasingly investing in late-stage innovation, and this suggests that the VC-backed 

firms which do apply will, on average, use the program to make incremental adjustments to a 

developed technologies. This is not, I believe, where the government can make the most impact. 

Rather, the government should invest where VC firms fail to invest - often in areas with high 

technical risk or with somewhat lower expected economic returns but high societal value. On the 

other hand, the program does need to emphasize viable commercialization, not just R&D. The 

25% rule is a good comprise. It can be made even better if the evaluation criteria differ between 

VC-backed and non-VC backed companies, and reviews of this aspect of the program are 

rigorous. 

4 
47 

Cambrian Innovation LLC 

5 Concluding Thoughts from a National Policy Perspective 

There is much more to say, of course, both about Cambrian's experience with the program and 

the ways in which the government can best catalyze innovation. I would refer the committee to 

my full testimony for some broader thoughts about the program and particularly some 

distinctions that could be made to increase effectiveness. The follow are some high level 

distinctions to consider in this or follow-on legislation: 

Infrastructure for Innovation: Most importantly, particularly for hardware innovations in 

energy, water, and fuels, there is a grey area where VCs will not likely invest, but universities no 

longer develop inventions. I believe that government should support small businesses taking 

risks in this grey-zone, with the eye towards creating an infrastructure for innovation. For 

example, we still might better leverage new models of innovation, prize funding, social 

networking, and other developments to get new solutions out faster. Lower cost innovation will 

be the key to competitive advantage for both companies and countries in the 21" century, and 

will ensure that the US continues to lead the world economically, and more generally. 

Distinctions within the Program: In general, the program may benefit from distinguishing 

between: 

Early stage innovation 

Small businesses already selling products 

VC-backed firms 

These kinds of small business all have different needs with respect to innovation, and would 

benefit from different evaluation criteria. 

SBIR Shops: I've heard that companies can tum into SBIR shops focused on R&D as a service, 

and that some consider this a problem. An anecdotal observation in this regard is that such shops 

are more likely to persist where SBIRISTTR funding comes from an agency that will be a user of 

the technology in their operations (e.g. NASA, Military) rather than one that is more domainagnostic (NSF, EPA). Tbe former group can treat the program essentially as low-cost R&D. In 

this sense, tbe shops can be considered viable businesses, like other government contractors. In 

fact, the return on investment for the government is likely much higher given the efficiency of 

small businesses. Therefore, it may make sense to distinguish a market-commercialization 

focused SBIR program from an agency-focused technology development activity. Small 

businesses will have a role to play in both. 

Thank you, again, for inviting me to contribute to this important hearing, and for supporting 

small businesses and entrepreneurs tbat can help re-build our country. I look forward to 

answering your questions. 

5 
48 

Chair LANDRIEU. Thank you, Dr. Silver. That was excellent testimony. 

I would like to recognize Senator Shaheen because she also is 

going back and forth between committees and wanted to say a 

word, and then we will get right to you, Mr. Hernandez. 

OPENING STATEMENT OF HON. JEANNE SHAHEEN, A U.S. 

SENATOR FROM NEW HAMPSHIRE 

Senator SHAHEEN. Thank you very much, Chair Landrieu and 

Ranking Member Snowe, and thank you for your leadership and all 

of the work on this legislation. 

I really wanted to say a few words in support of SBIR and STTR 

because it has been so important to New Hampshire businesses. As 

you point out, like Senator Brown and Senator Ayotte, we are all 

trying to be at Armed Services while we are here. I spent my time 

in New Hampshire at the end of January visiting companies that 

were benefitting from this program, and what I heard were the 

kinds of success stories that Dr. Silver and Dr. Jacobs are talking 

about in your firms, that it was because of those early investments 

through the SBIR program that they have been able to develop 

new product lines, grow the companies, and add jobs. 

Of course, I heard the big concern was about making the program long-term enough so that they could count on it, so I am sure 

every panelist is going to speak to that issue, but I think we have 

a winner here. It is important for us to get this reauthorized and 

let companies know that it is going to be there for the long term. 

Again, I very much appreciate your leadership, Chair Landrieu 

and Ranking Member Snowe. Hopefully, we can get this through 

very quickly. 

Chair LANDRIEU. Thank you, Senator. 

Senator Ayotte. 

OPENING STATEMENT OF HON. KELLY AYOTTE, A U.S. 

SENATOR FROM NEW HAMPSHIRE 

Senator AYOTTE. Thank you very much, Chairwoman Landrieu 

and Ranking Member Snowe. I also want to join my colleague from 

New Hampshire. I think this really demonstrates what an important bipartisan issue this is for small businesses in this country, 

and particularly in our State of New Hampshire. 

I came to Washington knowing that hard working American 

small business owners create the sustainable jobs that we need in 

this country. In fact, I come from a small business family, and so 

I think it is so critical that this is really the first hearing we have 

had and it shows the commitment of our leadership that this is 

very critical that we reauthorize this program. 

I also look forward to working with my colleagues on the Small 

Business Committee towards not only reauthorizing SBIR, but also 

to look to reduce burdensome regulations that make it very difficult 

often—that come from Washington—for our businesses to succeed. 

So I hope that that is an issue that we will also address in addition 

to reauthorizing this important program. 

Thank you so much for allowing me to make a statement, because we are going back and forth here. 
49 

Chair LANDRIEU. Thank you, and please feel free to slip out as 

we move forward. 

As we stated in our organizational meeting, looking at regulations and how it dampens the opportunities for small business is 

another priority of this committee, so you can rest assured that we 

will be on that as soon as we can get this program reauthorized, 

which is our first priority. 

Mr. Hernandez. 

STATEMENT OF JOE HERNANDEZ, CHIEF EXECUTIVE OFFICER, SIGNAL GENETICS, ON BEHALF OF THE BIOTECHNOLOGY INDUSTRY ORGANIZATION 

Mr. HERNANDEZ. Good morning, Chairman Landrieu and Ranking Member Snowe. I appreciate the invitation this morning to 

share a little bit of our story with all of you. 

I am Joe Hernandez. I am Chief Executive Officer of Signal Genetics. I also am the Executive Board Member of the Maryland 

High Tech Council and reviewer for the National Science Foundation for the Engineering Resource Center that they fund on an annual basis. 

I am privileged to be here today on behalf of the Biotechnology 

Industry Organization’s more than 1,200 companies, academic institutions, state biotechnology centers, and related organizations in 

all 50 states. We are involved in the effort of developing and further advancing the technology in health care, agricultural, environmental, and industrial biotechnology. 

In my career, I have had the privilege of being involved in some 

exciting cutting-edge technologies. I am a lot older than I look, I 

promise. I was involved early on in my career in Silicon Valley 

with the DNA microarray, which is technology that has revolutionized the way we look at genomics and genetics. I also was involved 

with a Maryland company by the name of Digene that commercialized the first molecular test for human papilloma virus, the 

causative agent of cervical cancer. 

In my more recent career, I have founded a number of companies 

and have had the pleasure of licensing technologies from universities, raising venture capital, applying to SBIRs, and commercializing products, all of which have created hundreds of jobs in the 

companies I have been involved with. 

I currently run a company that is focused in the area of personalized medicine for multiple myeloma. This new revolution in science 

will allow for individuals to get better therapeutic treatments as we 

know their genetics and the makeup of their genetics and how they 

ultimately respond to therapy. The advantages are better outcomes 

for the patients, but also, more importantly, better economics for 

our health care system. 

It is with this background of experiences that I offer my comments today. The SBIR program, as has been mentioned here before, has played really a critical role in bringing amazing innovations to the American people and created great enterprises and employed a number of people. Unfortunately, the effectiveness of this 

program is really threatened if not modernized to address the current reality of the marketplace. 
50 

Congress created this program, as you know, in the early 1980s 

to help companies overcome the valley of death. The realities of the 

market and the economy is that this valley has become deeper, 

longer, and now we call it a canyon of death. It is really a very brutal place. 

We need to support this high-risk, high-reward research. We 

want to take advantage of the basic research investments that we 

have made as a society in places like the NIH and academia. It is 

important that we leverage those investments. 

It has an enormous benefit to patients and society at large, and 

I would argue that if you look at some of the great innovations, at 

least in biotechnology, a lot of them had this genesis within the 

SBIR program. 

For 20 years, the small domestic biotech companies have competed for the SBIR programs, but in 2003, the Small Business Office of Hearings and Appeals ruled that a company did not meet 

the size standard because multiple venture capitalists owned more 

than 50 percent of the company. The reality is this case ignores the 

reality of these marketplaces. In the biotechnology industry, it 

takes us eight to 12 years to develop a product. It takes us $800 

million to $1.2 billion. Those are real numbers. Obviously, that cannot be done with SBIR dollars alone. It requires the involvement 

of outside investors in the venture community. 

The disturbing trends documented since the majority of VCbacked companies were excluded are actually quite alarming. The 

NIH notes that there has been a 40 percent decline in applications 

between 2004 and 2008. In 2009, there was the lowest number of 

small business participants in the SBIR program in a decade. 

The impact of the recession and the financial crisis in the biotech 

industry has been enormous. According to the National Venture 

Capital Association, for these last four consecutive years, the VC 

funds in the U.S. are declining. There is less investment and less 

risk taking in the venture community at this point. 

A Thomson Reuters study found the crisis caused 80 percent of 

biotech companies’ investors to change their strategy. The number 

of public biotechs has fallen by 25 percent between 2008 and—— 

Chair LANDRIEU. You have 30 seconds, please. 

Mr. HERNANDEZ. Thank you. The SBIR authorization must be reestablished, the eligibility for small VC-backed companies. It is imperative that we do that. And the award should provide to companies that provide the best science in their development. 

The SBIR reauthorization must clarify the SBA affiliation rules 

so that small companies can reasonably ascertain if they are eligible for the program. 

Lastly, BIO supports the SBIR authorization compromise 

reached at the end of Congress. We support the Senate passing this 

legislation. The bill improves access to SBIR at NIH, DOD, NSF, 

in particular. The bill clarifies SBIR affiliation rules in a way that 

gives peace of mind to small companies. We hope an SBIR authorization bill will be signed into law this year. 

Thank you for your time. 

[The prepared statement of Mr. Hernandez follows:] 
51 

Bio 

BIOTECHNOLOGY 

INDUSTRY ORGANIZATION 

HEARING TESTIMONY 

JOE HERNANDEZ 

CHIEF EXECUTIVE OFFICER 

SIGNAL GENETICS 

ON BEHALF OF THE 

BIOTECHNOLOGY INDUSTRY ORGANIZATION 

BEFORE THE U.S. SENATE COMMITTEE ON SMALL BUSINESS AND 

ENTREPRENEURSHIP 

"REAUTHORIZATION OF THE SBIR AND STTR PROGRAMS" 

February 17,2011 

Good morning Chairwoman Landrieu, Ranking Member Snowe, Members of the 

Committee, ladies and gentleman. I am Joseph Hernandez, Chief Executive Officer of 

Signal Genetics, Executive Board member of the Maryland High Tech Council and 

Reviewer for the National Science Foundation. I am privileged to be here on behalf of 

the Biotechnology Industry Organization's (BIO) more than 1,200 member companies, 

academic institutions, state biotechnology centers and related organizations in all 50 

states involved in healthcare, agricultural, environmental and industrial biotechnology. 

In my career, I have had the privilege of being involved early on in the development of 

cutting edge biotechnologies such as the DNA microarray, a tool which has revolutionize 

our knowledge of genetics and the role of our genes play in disease. I was also involved 

with Digene, a company that revolutionized cervical cancer diagnostics by developing the 

first molecular test for the Human Papilloma Virus (HPV), the causative agent in cervical 

cancer. I have licensed technologies from universities; built management teams, received 

SBIR awards, raised over $30 million in venture capital and launched many products. 

More recently, I have been involved in the establishment of early-stage companies and 

have firsthand experience of the challenges and difficulties of getting these companies off 

the ground. I currently run a personalized medicine company where we use a person's 

DNA to determine the degree of risk of their cancer and identify the best course of 

treatment. This approach offers better patient outcomes, but also serves an important role 

in managing treatment costs. We recently launched our first product in Multiple 
52 

Myeloma and look forward to bringing additional similar products to the market. It is 

with this background of experiences that I offer my comments today. 

The role of the SBIR program in bringing breakthrough therapies to the American people 

is a matter of record. Awards have helped companies fund proof of concept studies 

which enabled them to attract the private-sector funding required to develop a new 

treatment or therapy that is ultimately made available to patients. Despite its noble past, 

the ability of the SBIR program to provide critical funding for medical research projects 

will remain hampered unless SBIR reauthorization modernizes the program to address 

the current realties facing small, innovative American biotechnology companies. 

As you know, Congress created the SBIR program in the early 1980's because it 

recognized that promising early stage scientific research all too often failed to be funded 

through the markets because it was viewed as too high risk. This failure of the markets is 

often referred to as the "valley of death." As developers of the next-generation of 

treatments for diseases that would have been considered unapproachable just a decade 

ago, it is incumbent on our system to find ways to support these risky, yet 

transformational, therapies that could improve the lives of children and adults suffering 

from genetic disorders, infectious diseases, cancer, and autoimmune diseases, among 

others. We want to take advantage of the ground-breaking scientific discoveries in basic 

research that has been achieved in the last decade at NIH, in academic centers, and in 

industry and translate them into tangible treatments as rapidly as possible to improve the 

lives of patients. This holds enormous benefits for the individuals affected, the 

organizations and companies working on these initiatives, and our society in general. 

For twenty years small, domestic biotechnology companies competed for SBIR grants. 

In addition to providing funding, these grants were a powerful signal to the private sector 

that a company's research was compelling and possessed scientific and technical merit. 

However, in 2003 the Small Business Administration's Office of Hearings and Appeals 

(OHA) ruled that a biotechnology company, Cognetix, did not meet the SBIR size 

standard because multiple venture capital investors, in the aggregate, owned more than 

50% ofthe company's stock. The ruling, which is not based on the SBIR statutory 

language, ignores the realities of the marketplace where small biotechnology firms must 

raise tens of millions of dollars to conduct incredibly time and capital-intensive research. 

It is estimated that it takes between 8 and 12 years to bring a biotechnology therapy to 

market and costs between $800 million and $1.2 billion. These small biotech firms 

typically have fewer than 50 employees, no products on the market, and must raise 

considerable funds through a combination of angel investors and venture capital firms in 

order to make a new therapy available to patients. 

Since the exclusion of small majority venture-backed companies, the National Institutes 

of Health (NIH) have documented disturbing trends. There was a 40% decline in the 

number of applications between 2004 and 2008 and in 2009 the number of new small 

businesses participating in the program decreased to the lowest proportion in a decade. 

Additionally, the impact of the recession on small biotechnology companies is still being 

felt. In fact, according to the National Venture Capital Association, venture capital 

2 
53 

companies raised $12.3 billion in 2010 - the 4th consecutive year of decline and the 

slowest annual period since 2003. A 2009 joint study by BIO and Thompson Reuters 

found that the economic crisis forced 80% of biotech investors to change their investment 

approaches. They can no longer afford to invest in high-risk projects characteristic of 

early-stage biotechnology companies. This trend is expected to continue, making 

investment in early-stage cutting-edge research, even for a company's lead project, 

extremely difficult to obtain. In fact, the number of active public biotechnology 

companies fell 25% from January 2008-2010 and among those still in existence, 38% had 

less than one year of cash on hand. 

SBIR can playa critical role in aiding small biotechnology companies in their early stage 

research to navigate through the "valley of death," helping small innovative U.S. 

companies advance, and ensuring that the U.S. maintains its global leadership in 

biomedical research. Unfortunately, the program's ability to help small innovative life 

science companies develop breakthrough treatments and therapies that offer hope to 

patients and potential solutions to our nation's most critical health care needs has been 

severely compromised by preventing the majority of small biotechnology companies 

from competing for awards based on scientific merit. To quote the National Research 

Council's 2009 report, Venture Funding and the NIH SBIR Program, " ... restricting access 

to SBIR funding for firms that benefit from venture investments would thus appear to 

disproportionately affect some of the most commercially promising small innovative 

firms." The report goes on to note that the current SBA eligibility rules have "the 

potential to diminish the positive impact ofthe nation's investments in research and 

development in the biomedical area." 

Eligibility for small biotechnology companies that are a majority-owned by multiple 

venture capital companies should be reinstated. This will ensure that awards are provided 

to small, U.S. biotechnology companies that have the best science and greatest potential 

to provide treatments and therapies that will improve public health. 

It is equally important that the reauthorization clarify SBA affiliation regulations. Under 

current SBA regulations, when determining the size of a business, the SBA considers the 

number of direct employees at the business as well as affiliated businesses' employees. 

In the world of biotechnology venture capital investors, a single venture capital company 

often has investments in 5-10 other biotechnology companies. As such, a typical small 

biotechnology company has multiple venture capital company investors, each owning a 

minority share of the company but often collectively owning more than 50%. An SBIR 

applicant with 50 employees can be deemed affiliated not only with its venture capital 

companies who have minority ownership but with hundreds of employees from those 

venture capital companies' other portfolio companies. This occurs despite the fact that 

the SBIR applicant has no business relationship with those portfolio companies other than 

a shared investor. 

Not only are these affiliation rules nonsensical, the manner in which they are applied is 

often a mystery to the small business applying for the SBIR grants. As a result, a small 

company may certify in good faith that it is eligible for an SBIR grant, only to later find 

3 
54 

out that the SBA has affiliated it with a large number of employees at other unrelated 

companies, thus making the small business ineligible. 

BIO believes that the reauthorization should create a more rational and effective 

affiliation process regarding determinations about an SBIR applicant's investor's portfolio 

companies. Specifically, affiliation should be based on criteria such as evidence of a 

mutually beneficial business relationship (contracts, shared profits, etc.) and not by virtue 

of a shared investor. This common-sense reform will protect the integrity of the program 

and provide clarity for small business entrepreneurs looking to participate in the program. 

At the end of last Congress, the Senate passed a compromise reauthorization bill. BI 0 

supported passage of that bill in the Senate and we still do. It included improvements to 

the current program in that it would allow majority-venture backed companies to compete 

for up to 25% offunds at NIH, NSF and DOE and up to 15% in other SBIR programs. 

The bill also provided language that would direct the SBA to promulgate rules for 

determining affiliation so as to ensure that such determinations are not based solely on 

one or more shared investors. It is our hope that the Senate passes a bill that includes 

these provisions and that the House and Senate will pass a bill that can be signed into law 

by the President this year. 

4 
55 

Chair LANDRIEU. Thank you, and Dr. Silver, you have expressed 

one view on this. Mr. Hernandez expressed another. But the good 

news is there has been a compromise between both of you on it and 

we appreciate it, because this has been one of the issues that has 

held up this reauthorization. We really appreciate everybody leaning forward on the venture capital component of this. 

Mr. Glover. 

STATEMENT OF JERE GLOVER, EXECUTIVE DIRECTOR, SMALL 

BUSINESS TECHNOLOGY COUNCIL 

Mr. GLOVER. Thank you, Chairwoman. It is an honor and a privilege to be here. I first testified before this committee over 30 years 

ago, and this committee has been a leader in small business and 

innovation during this entire period. There are a lot of pieces of 

legislation that had this committee not been in the forefront would 

never have happened—equal access to justice, the Regulatory 

Flexibility Act, and, of course, the SBIR legislation. You have got 

a proud tradition and your new members should welcome and 

honor that tradition. You have always had magnificent staffs, bipartisan staffs, and worked together, and I want to commend both 

of you on that. 

Senator Snowe, you are one of the few people who have been 

fighting this fight longer than I have, and your leadership and support when you were a member of the House of Representatives and 

cosponsoring that was a courageous step then and you have remained courageous in your defense of small business. 

And we could not ask for a better Chairwoman than we have 

right now. I want to thank both of you for that. It is an honor to 

be here. 

First and foremost, reauthorize this program. Ten CRs is enough. 

We really need stability in the program. It is absolutely critical. 

Permanent would be better, but we will take as long as we can get. 

The more stability, the less uncertainty, the better it is for everyone. It really is working, and I do not think you should make major 

changes to this legislation. 

The caps are important to prevent very large awards from crowding out other companies, other technologies, other opportunities, 

and I think that the bill has struck a good compromise in that regard. Without an authorization increase, it will reduce the number 

of awards given by 25 percent, and that is simply not acceptable 

for a program that is this good. 

One of the questions that is always asked is do you need an allocation, and the answer to that was answered back in the 1982 

hearings in which Congress basically said that others have the inside track—universities, large businesses. Without some direction 

from Congress, we are going to continue to see small business 

crowded out of where they can do the very best. Everyone knows 

they are the most efficient in innovation and research. We have 

seen a change in where scientists and engineers work. Thirty-eight 

percent now work for small business. We have seen a clear change 

in where key innovations come from, to now 25 percent come from 

small business. Large firms have virtually gotten out of the innovation business, and that is very clear from the study that has gone 

out there. 
56 

We are now faced with small businesses in a perfect storm of 

capital and credit shortages. As the Office of Advocacy’s recent 

studies on bank lending show, we are seeing a tremendous shortage in bank lending for small business. We are seeing a shortage 

in venture capital, especially early in seed stage. Angel funding is 

down. And you do not even have equity in your homes to go out 

and borrow money to help grow your innovation and technology. So 

this is really the only steady, constant source of funding for small 

business, new ideas, new technology. 

We are in an international competitive situation where knowledge developed in America is immediately transmitted around the 

world, and we are seeing jobs from our knowledge taken overseas. 

We need to make sure those stay, and the best way to do that is 

through small business. 

Twice before, we have seen the President and Congress look at 

the situation where we were coming out of severe recessions and 

decided that the SBIR program was important. President Reagan 

in the early Congress in 1982 decided that this was an important 

thing to do to help create jobs, to help grow innovation and technology. Again in 1992, Congress doubled the SBIR program, with 

the support of President Bush. 

So we have seen recognition in the past, when you were in a severe economic time, it was time to call on small business innovation. I would urge you to do that now. 

Now, I have some questions for both the Congress and the 

Obama Administration. Why is small business still under five percent of research and funding expenditures by the Federal Government? They do 25 percent of the innovations. They do more patents. The SBIR companies alone do more patents than all the universities. They do 38 percent of all patents in America. Why is 

there no Phase 3 program in any agency except for DOE? DOE’s 

accelerator program is a courageous, bold step forward. Why is it 

that there is not such a program at all the other agencies? They 

could voluntarily do that, and quite frankly, from the Obama Administration, why are they not supporting a significant increase in 

this program? 

I think that when we look at this, we see that it is a great program. It has done what it was intended to do. We support the compromise legislation. 

I will say one point on a comment that Mr. Hernandez said. He 

mentioned the 2009 numbers were down at NIH. I would be happy 

to submit to the committee the 2010 numbers. They are up dramatically. It is the second highest in ten years in terms of SBIR 

proposals being submitted. That is just a little outdated. It is a little cyclical over the years. We have said that. But now, it is back 

up to the second highest number in the last decade. 

Thank you very much. 

[The prepared statement of Mr. Glover follows:] 
57 
58 

Chairwoman Landrieu, Ranking Member Snowe, members of the Committee, thank you for the 

opportunity to appear here today to discuss the importance of technological innovation to the 

United States and the reauthorization of the SBIR and STIR Programs during our recovery from 

the worst recession since the Great Depression. I am Jere W. Glover, Executive Director of the 

Small Business Technology Council (SBTC) of the National Small Business Association in 

Washington, DC. I have been involved in federal science and technology innovation programs 

since 1978 when I staffed joint Senate/House hearings and the resulting report that showed 

severe under-utilization of small business high-tech companies in the Federal R&D programs. I 

The SBTC is an outgrowth of the White House Conference on Small Business in 1995, and is the 

nation's largest association of small, high-tech SBIR and STTR companies in diverse fields 

I am pleased that the SBTC Board of Directors recently recognized both Chairwoman Landrieu 

and Ranking Member Snowe with the Milton Stewart Award for their outstanding work in 

brokering the compromise that led to last year's efforts for a potential SBIR reauthorization bill 

(S 4053). Both Senator Landrieu and Senator Snowe have been champions of the SBIR program, 

and our membership is very grateful for their dedication and hard work in promoting and 

preserving this important program, as well as the hard work of their staffers. 

I. The SBIR Program, Recessions and Job Creation: The original SBIR program was 

sponsored by the conservative Senator Warren Rudman [best known for co-authoring the 

Gramm-Rudman-Hollings deficit reduction law] and was co-sponsored by the even more 

conservative Senator Barry Goldwater and 82 other bipartisan co-sponsors. From the PL-97-219 

Senate Findings and Purpose [Appendix AJ it was clear that the SBIR program was intended to 

maximize the return on taxpayers' dollars by forcing the Federal Agencies overseeing this 

research to utilize: 

"(3) small businesses fwhiclt/ are among the most cost-effective performers of 

research and development and are particularly capable of developing research and 

development results into new products.,,2 

The Senate record clearly shows that the SBIR program was not an allocation to help needy 

small companies. Rather it was a strong signal to Federal Agencies to make more effective use of 

the innovative scientists and engineers employed by aggressive small companies that had the 

potential to convert R&D funds into new products and create new jobs. It was signed into law as 

PL-97-219 by the Republican iconic champion of Free Markets, President Reagan on July 22, 

1982, in the midst of the recession lasting from July 1981 to November 1982.3 

Senator Rudman also sponsored the 1992 SBIR reauthorization legislation (with 21 bi-partisan 

co-sponsors) which doubled the SBIR allocation rate to 2.5 percent and increased the STTR 

allocation rate to 0.3 percent. The Hearings were held shortly after the recession which dated 

from July 1990 to March 1991. PL-102-564 was signed into law by President George H. W. 

Bush on October 28, 1992. The Senate Findings for PL-102-564 show further Congressional 

support for the SBIR program and frustration that the Federal Agencies had not increased small 

business R&D contracting [Appendix BJ: 

"(3) small business innovation research program participants have provided high 

quality research and development in a cost-effective manner; 

(6) ... the small business innovation research program has created jobs, ... and 

improved the competitiveness of the Nation's high technology industries; .. . 

increasefdJ exports from small business concerns 

(8) despite the general success of the small business innovation research program, the 

proportion of Federal research and development funds received by small business 

concerns has not increased (lver the life (If the program, but has remained at 3 percent" 

2 
59 
60 

THE QUESTION 

The question we ask today is whether this Congress and President 

Qbama will take the same strong actions Presidents Ronald Reagan and 

George H. W. Bush and the 97th and l02nd Congresses took in similar 

times to help pull the economy out of the recession and create 

innovation and jobs by significantly increasing the percentage allocation 

for both the SBIR and STTR programs? We certainly hope they will. 

[Appendix C is our paper: SBIR-It Is Working!] 

This testimony provides considerable detail on the highly efficient SBIRISTTR programs and 

their ability to convert Federal R&D funding into new commercial products and therefore, into 

new jobs, and new high-technology exports. Clearly these are critical to our Nation's ability to 

pull out of the longest and deepest recession since WWII. The reauthorization of the SBIR and 

STTR programs are very important to our Country, the small business community we represent 

and to the Federal Agencies tasked with managing these Federal research programs. 

II. First, The VC Question. The current process to reauthorize the SBIR program has been 

going on for almost 5 years. Since the last reauthorization expired in 2008, there have been 10 

continuing resolutions keeping this program going a few months at a time. The Federal 

Agencies and the small businesses that depend on this program need to know with certainty that 

this program is going to be around for the long term to plan their budgeting and staffing. By only 

extending the program a few months at a time, Federal Agencies and small businesses are forced 

to guess whether or not they will have funding for future projects. This is inefficient. 

For most of this period, the issue holding up reauthorization has been whether or not to allow 

majority venture capital (VC) owned firms into the program. Late last year, the Small Business 

Technology Council, the Biotechnology Industry Organization (BIO), and others finally reached 

a compromise, brokered by the staff of the Senate Small Business Committee, which paved the 

way for last year's proposed legislation (S 4053). Among other things, the compromise allowed 

majority-VC owned businesses into the program, but limited their participation to ensure that 

small businesses not backed by large firms are not edged out of the program. SBTC members 

and Board of Directors supported the compromise legislation last Congress, and we continue to 

support the compromise legislation as long as it holds together in this Congress. 

III. Next, Let's Counter the University Arguments Against Increasing the 

SBIRJSTTR Allocations: There is a current saying around the Washington and the US that: 

"Universities convert dollars into knowledge, and small companies convert 

knowledge into money and jobs." 

We don't know the author of this statement, but we thank whoever it is for a "bumper sticker" 

message that contains much truth. 

SBTC believes strongly that SBIR companies and the universities should not be fighting over 

their pieces of the Federal Extra-mural R&D pie (SBIR receives 2.5% of Federal R&D funding, 

and universities have averaged about 28%).4 In the introduction to Congressional testimony in 

1999, I stated, "A proposal to create bridges, rather than walls, between these organizations is 

advanced to help ensure that the importance of the federal R&D funding of the entire continuum 

of the U.S. innovation process is communicated well to Congress and the public."s 

4 
61 
62 

In short, although the proportion of quality scientists and engineers has grown over sixfold during the life of the SBIR program, the small company portion of the Federal R&D 

funds has remained almost the same over these past 30-plus years. And, as shown in 

Table 1, small businesses are the most productive of our technology sectors in converting 

dollars to patents. The market has recognized the efficiency and cost saving of using 

small business. Outside of the highly qualified SBIR stafI, the Government Agencies 

have not. 

Table 1. Comparison of Federal R&D Dollars Received and Patents Granted9 

Organizations Federal R&D Dollars Patents Granted 

Small Business 4 percent 38 percent 

Large Business 36 percent 55 percent 

Non-Profit Labs 6 percent 2 percent 

Federal Research Labs 26 percent 2 percent 

Universities 28 percent 3 percent 

3. Why can't small business obtain a larger share of the Federal R&D funds without 

an "allocation" program? This is a great question that was answered in the 1978 

Senate-House joint hearings referenced above and the Senate hearings of 1982. What 

Congress found were the following market structural problems that prohibited a "freemarket" competition for Federal R&D funds: 

a. Small businesses were always at a disadvantage when competing with large 

companies or universities for research projects - because Federal Program 

Managers and Contracting Officers would always take the safe bet for their 

careers - the large companies or universities. Who could criticize a career civil 

servant for choosing MIT or IBM over "Jane and Joe Smith's 5-person R&D 

shop?" 

b. Universities had an "inside track" for almost all Federal R&D contracts because 

many of the decision makers and peer-review panels were staffed with university 

employees on loan to the agencies conducting the research. These individuals 

have a bias toward their fellow academics. 

c. Universities and large businesses have dedicated marketing organizations that are 

often larger than the entire technical staffs of the competing small companies and 

therefore are able to obtain "inside tracks" on procurements. 

For these reasons, Congress in 1982 and 1992, with a strong history of full and open 

hearings going back to 1978, and with great bipartisan support passed and enlarged 

the SBIR program to correct this distortion in the Federal R&D funding market. 

4. What about the productivity of the SBIRISTTR program versus universities in the 

effective use of taxpayer Federal R&D funds? 

a. SBTC believes it is helpful to compare the productivity of the SBIR companies 

versus universities in two key critical factors shown below in Table 2: 

6 
63 
64 

From a different perspective, the Information Technology and Innovation Foundation 

recently analyzed the annual lists of the 100 most technologically-important innovations, 

as selected each year by a panel of judges for R&D Magazine. 17 In the chart above 

(Figure 4), the authors compared the performance of innovations from SBIR companies 

on these annual assessments, with those from Fortune 500 companies and universities.ls 

As the chart indicates, for the past decade, about one-fourth of the most important 

technological innovations in the nation have been coming from the SBIR Program - with 

only 2.5 percent of the Federal Extramural R&D funding, vs approximately 28+ percent 

for the universities. Or, as the authors themselves put it: 

"The results show that these SBIR-nurtured firms consistently account for a 

quarter of all R&D 100 award winners - a powerful indication that the SBIR 

Program has become a key force in the innovation economy of the United 

States.,,19 

A rough calculation of dollars per innovation can be made by comparing the number of 

"Key Innovations" per Figure 4, the ITIF chart, with total funding provided over an 

average of two years to universities and the SBIR funding to SBIR companies (2005 to 

2006). We have rounded up the university Key Innovations to 10 for the years 2004 to 

2006, and have rounded down the SBIR Key Innovations to 20 for the same years. Based 

on the AUTM report for 2005 to 2006 the average university funding was $43.5 billion,2o 

and accordin§ to the NSF SBIR web site, the 2006 SBIR funding was approximately 

$1.73 billion. I The approximate results are shown in Table 3 below and show a - 50:1 

multiplier of SBIR firms vs universities: 

Table 3. Key Innovations Per Dollar of R&D Funding - Approximate Average 2005 to 2006 

Organization Avg. Funding - Billions Key Innovations-Average $/Key Innovation 

Universities - $43.5 -10 - $4.35 Billion 

SBIR Companies - $1.73 - 20 - $86.5 Million 

5. What about the quality of SBIRISTTR projects versus university-conducted 

research? This has been studied by both GAO and the National Research Council and 

they both found that the quality of the SBIRISTTR research is comparable to university 

research. 

a. GAO Observations: From: Observations on the Small Business Innovation 

Research Program, Statement for the Record of Anu K. Mittal, Director Natural 

Resources and Environment Team, GAO-05-86IT, June 2005. See Appendix D. 

i. "Between July 1985 and June 1999, GAO .... found that SBIR is 

achieving its goals ... to stimulate commercialization of research results . 

. . Participating agencies and companies ... generally rated the program 

highly." 

ii. "High-quality research. .. more than three-quarters of the research 

conducted with SBIR funding was as good as or better than other 

agency-funded research. Agency officials also rated the research as more 

likely than other research they oversaw to result in the invention and 

commercialization of new products ... " 

8 
65 

iii. "Widespread competition . ... had a high level of competition, and 

consistently has had a high number of first-time participants .... We also 

found that the agencies deemed many more proposals worthy of awards 

than they were able to fund. For example, the Air Force deemed 1,174 

proposals worthy of awards in fiscal year 1993 but funded only 470. 

iv. "Successful commercialization. SBIR successfully fosters 

commercialization of research results. 

v. "Helping to serve mission needs. SBIR has helped serve agencies' 

missions and R&D needs. 

b. National Research Council Study. This 2008 study was mandated by Congress 

and involved a 6-year assessment of the entire SBIR program at all agencies?2 

The report has been presented to Congress and some of the findings are presented 

here. See Appendix E for details. 

i. NATIONAL RESEARCH COUNCIL (NRC) STUDY FINDINGS: 

ii. "The Small Business Innovation Research (SBIR) Program Is Making 

Significant Progress in Achieving the Congressional Goals for the 

Program. 

iii. Overall, the Program Has Made Significant Progress in Achieving its 

Congressional Objectives by: Stimulating Technical Innovation 

iv. Using Small Businesses to Meet Federal Research and Development 

Needs. 

v. Increasing Private Sector Commercialization of Innovation Derived 

from Federal Research and Development.. 

vi. SBIR Is Meeting Federal R&D. The NRC survey revealed that 56 

percent of surveyed projects were successful in attracting additional 

funding from a variety of sources. 

vii. Linking Universities to the Public and Private Markets ..•• a third of 

all NRC Phase II and Firm Survey respondents indicated that there had 

been involvement by university faculty, graduate students, andlor a 

university itself ... " 

IV. Proposed Dramatic Increase in the STTR Allocation: We appreciate the 

great contribution that universities make to advancing knowledge. As stated in my 1999 

testimony we believe in a cooperative relationship between universities and small businesses 

such as envisioned by Congress in establishing the STTR program. In this economic time 

with the need to allocate the federal funds to the most efficient use, we think it is better for 

the knowledge sector and the jobs/money sector to work together. For this reason, we have 

proposed a dramatic increase in the STIR program. This program forces the universities and 

small businesses to work together to the mutual benefit of all - especially the taxpayers. A 

detailed discussion by SBTC of expanding the STIR program is included in this testimony as 

AppendixF. 

9 
66 
67 

2tHO 
68 

The Office of Advocacy, US Small Business Administration, just released on February 11, 

2011, their annual banking study, Small Business Lending in the United States, 2009-20JO?6 

The report summary states: 

"U.S. gross domestic product has increased since second quarter 2009; however, small 

business lending by depository institutions continues to decline. This decline reflects the 

challenges posed by an uncertain economy in which small business owners are reluctant 

to acquire more debt, lenders are cautious about extending more debt, and regulators are 

carefully watching the performance of all out-standing debt. The aggregate value of small 

business loans held by depository institutions declined by 6.2 percent from $695.2 billion 

in 2009 to $652.2 billion in 2010." 

A further Office of Advocacy release on February 13, 2011 by the Chief Counsel are the 

Small Business Financing27 charts below which show the reduction of the most important 

financing affecting the SBIR/STTR programs: (all in $ Billions) 

1. Total Small Business Lending (1995) 2003 to 2010 showing the steep drop in 

banking and related lending after 2008. 

2. Angel (Blue-dashed line) and Venture Capital Financing (Red line) 1995 to 2010 

showing the declines after the dot-com bust of 2000. 

3. SBIR funding showing the drop after 2006. 

Figure 8. Small Business Financing 1995 to 2010 

Total Small Business Lending, 1995-2010 

Small Business Inr.o'"'ai1:1ive Research., 1995-2010 

What these charts show is that SBIR companies are facing the same very discouraging credit 

market that all small businesses have. This Committee is well familiar with this problem and 

we applaud your efforts to draft policies that can help tum this problem around. 

12 
69 

VII. Finally, Let's Look at the Importance of the SBIR Program in 

Financing Small High-Tech Companies - And, How They Leverage 

Federal R&D Funds to Bring Products to Market. What I'd like to discuss in 

closing today is that SBIR and STTR companies can and do provide financial leverage to the 

Federal R&D dollars they receive - something that is not possible on most university 

projects. The SBIR and STTR programs can provide a very important stimulus to jump start 

the commercialization of the technologies of the companies awarded contracts. The SBIR 

and STTR grants/awards are non-dilutive to the shareholders' equity, and are not loans that 

detract from a company's balance sheet. In fact they are looked on with considerable favor 

by: 

I. Equity investors because the SBIRISTTR program has "vetted" the company's 

technology through the peer review competitive selection, and because the company 

has shown an ability to meet the contract/financial/management reporting systems 

imposed by the programs regulations. In addition, the Commercialization Plans 

legislated by Congress and required by all of the SBIRISTTR agencies provide the 

potential investors with the company's strategies for creating a market for the 

product. 

2. Banks and other financial institutions for lending because ofthe "solid customer" 

caliber of the contract with the Federal government, and because of the vetting and 

reporting requirements and commercialization plans favored by equity investors. In 

addition, lenders see these contracts as "operations loans" with very low risk since the 

delivery requirements are research reports and items. 

3. Lenders and equity investors when the SBIRISTTR program reaches the Phase III 

stage because the company is now in commercial production of a product that the 

lenders and investors have known through the approximate two plus years of Phases I 

and II. At this stage the Commercialization Plans are particularly useful because the 

companies have real customers and market opportunities. 

This leverage permits the SBIRISTTR companies to employ more staff than the universities 

can for the same Federal R&D dollar because universities produce only research 

reports/items. By their very nature, they do not have marketing and production organizations; 

therefore, there is no Phase III for their research. The high rate of commercialization reported 

by GAO and NRC referenced above provides for a direct multiplier on the Federal R&D 

funds expended on the SBIR and STTR program. 

Lastly, this Committee well knows that the small businesses are the most important sector of 

our economy in creating net new jobs. From Office of Advocacy data we know that small 

businesses, particularly those the size of SBIRISTTR program, created more than two-thirds 

of the net new jobs over the past 15 years.28 

VIII. The SBIR and STTR programs deserve to be reauthorized quickly -

perhaps permanently - and their allocation significantly increased. On behalf 

of the members and Board of SBTC and NSBA we thank you for holding this very timely 

hearing. 

13 
70 

1 As Counsel to the House Small Business Committee, I helped convene the first joint House-Senate 

Small Business Committee hearings on the subject in 1978. These hearings showed that, despite their 

demonstrated superior efficiencies at innovating, small companies received only 3.5% of federal R&D 

contract dollars. Today, with far more science and engineering talent at their disposal, and a far more 

widely acknowledged record of innovations, small companies still receive only 4.3% of those R&D 

contract dollars. And SBIRISTTR accounts for more than half of that. I subsequently testified before 

Congress regarding small business and innovation on numerous occasions, as Deputy Chief Counsel for 

Advocacy at SBA during the Carter Administration, as Chief Counsel during the Clinton Administration, 

and as Executive Director of SBTC during the George W. Bush and the Barack Obama Administrations. 

SBTC represents more companies that are active in the federal Small Business Innovation Research 

(SBIR) and Small Business Technology Transfer (STTR) Program than any other organization. SBTC 

also serves as the Technology Council of the National Small Business Association, the nation's oldest 

nonprofit advocacy organization for small business, which represents over 150,000 small companies 

across the United States. I appear here today on behalf of both organizations. 

2 See Appendix A for Findings and Purpose of PL-97-219 

3 Recession source: NBER Recessions of the Twentieth Century. 

4 http://www.nsf.gov/statistics/seind10/append/c4/at04-07.pdf 

5 A New View of Government, University, and Industry Partnerships, Jere Glover, then Chief Counsel of 

the Office of AdVOcacy, at the Senate Committee on Small Business Roundtable Discussion on the SBIR 

rrogram on August 4, 1999. 

One of the first examples was the March 10, 1982 hearing by the R&D Subcommittee of the House 

Armed Services Committee on HR-4326, where Stanford University and the American Electronics 

Association (AEA) both testified against the program, and the Electronic Association of California (a 

small-business trade association spin-off from AEA) testified in favor of the SBIR program. 

7 Testimony by Jere W. Glover before the Subcommittee on Technology and Innovation, Committee on 

Science and Technology, United States House of Representatives, 23 April 2009. 

8 National Science Foundation, Science and Engineering Indicators, 2007. 

"Ibid 

10 Press releases for the Association of University Technology Managers (AUTM) U.S. Licensing Activity 

Survey Summary: FY-2007 to 2009, average annual funding is $51.4 billion; average number of patents 

issued is 3440. See: 

http://www.autm.netiAMlTemplate.cfm?Section-Ucensing Surveys AUTM&Template=lTaggedPagelTag 

~edPageDisplay.cfm&TPLlD=6&ContentlD=2409 

1 Data from www.inknowvation.com the web site for Ann Eskesen, 2011, the best source of SBIR data. 

From the program inception in 1982 to date total funding is $31.8 billion; total number of patents issued is 

75,265. 

12 AUTM, Op Cit, 2009; R&D funding to universities was $53.9 billion, and licensing income was $2.3 

billion for 2009. 

13 An Assessment of the Small Business Innovation Research Program, National Research Council, 

National Academies Press; Charles W. Wessner, Editor, Committee on Capitalizing on Science, 

Technology, and Innovation; 2008; see: http://www.nap.edu/catalog.php?record id=11989 Page 122, 

whiCh states: "On average, SBIR projects received almost $800,000 from noo-SBIR sources, with over 

half of respondents (51.6 percent) reporting some additional funds for the project from a non-SBIR 

source.' [Since only one-half of the respondents reported receiving additional funds, we have discounted 

the $800,000 number in the NRC report to $400,000. Per the NRC report, the average Phase I plus 

Phase II funding was approximately $100,000 plus $675,000 or $775,000 during the period of the study.] 

14 Office of Advocacy, U.S. Small Business Administration, See: http://www.sba.gov/advocacyI7495/8420 

15 Managing University Intellectual Property in the Public Interest, 2010, Committee on Management of 

University Intellectual Property: Lessons from a Generation of Experience, Research, and Dialogue; 

Stephen A. Merrill and Anne-Marie Mazza, Editors; National Research Council, 

http://www.nap.edu/catalog/13001.htmIPage 68, "Finding 2: The transition of knowledge into practice 

takes place through a variety of mechanisms, including but not limited to: 1. movement of highly skilled 

students (with technical and business skills) from training to private and public employment; 2. publication 

of research results in the open academic literature that is read by scientists, engineers, and researchers 

in all sectors; ... 8. licensing of IP to establiShed firms or to new start-up companies.' 

18 Innovation Development Institute, 2009, from U.S. Patent and Trademark Office data. 

14 
71 

17 Fred Block and Matthew Keller, Where Do Innovations Come From? Transformations in the U.S. 

National Innovation System 1970-2006, Information Technology and Innovation Foundation, July 2008. 

18 These charts were included in the testimony by Jere W. Glover, 2009, Op Cit 

19 Ibid., p. 15 

20 AUTM, Op Cit, In 2005 and 2006, the reported R&D funding to universities was $42 billion and $45 

billion respectively. 

21 http://www.nsf.gov/statistics/seind10/c8/c8s6049.htm For 2005 and 2006 NSF reports that the SBIR 

funding was approximately $1.73 billion average per year. It is clear that a "Key Innovation" may take 

years from the time of research to market impact, but it is proposed that by treating both organizations the 

same, and since the funding levels were relatively comparably stable over the previous 2 years, the 

information shown is a reasonable approximation. 

22 An Assessment of the SBIR Program, Op Cit. 

23 Assumes 40% of Phase I awards go to Phase II. 

24 Federal Reserve Bulletin: Profits and Balance Sheet Developments at U.S. Commercial Banks in 2009, 

Last update: September 2,2010. 

See: http://www.federalreserve.gov/Pubs/Bulletin!2010/articles/profiUdefault.htm#fig3 

2S Innovations in Economic Development Forum, Co-sponsored by the Georgia Tech School of Public 

Policy and the Georgia Tech Enterprise Innovation Institute, Atlanta, GA Wednesday February 2,2010. 

Speaker: Brian Headd, Economist, Office of Advocacy, U.S. Small Business Administration The Economy 

During the 1990s. 

28 Small Business Lending in the United States, 2009-2010, Office of Advocacy, US Small Business 

Administration, released on Feb 11, 2011, by Chief Counsel for Advocacy, Dr. Winslow Sargeant. See: 

http://www.sba.gov/sites/defauIUfiles/files/sbl_10study.pdf 

27 Small Business Financing, 1995 to 2010, Office of Advocacy, US Small Business Administration, 

released on February 14, 2011, by Chief Counsel, Dr. Winslow Sargeant. 

28 Office of Advocacy, US Small Business Administration, See: http://www.sba.gov/advQcacy!7495/8420 

15 
72 

APPENDIX A 

PUBLIC LAW 97-219 Signed JULY 22,1982 

Public Law 97-219, 97th Congress 

An Act 

To amend the Small Business Act to strengthen the role of the small, innovative 

firms in federally funded research and development, and to utilize Federal research 

and development as a base for technological innovation to meet agency needs and to 

contribute to the growth and strength of the Nation's economy. 

Be it enacted by the Senate and House of Representatives of tile 

United States of America in Congress assembled, 

SECTION I. This Act may be cited as the "Small Business Innovation Development Act of 1982". 

SEC. 2. (a) The Congress finds that-

(I) technological innovation creates jobs, increases productivity, competition, and economic growth, 

and is a valuable counterforce to inflation and the United States balance-ot:payments deficit; 

(2) while small business is the principal source of significant innovations in the Nation, the vast 

majority of federally fimded research and development is conducted by large businesses, universities, 

and Government laboratories; and 

(3) small businesses are among the most cost-effective performers of research and development and 

are particularly capable of developing research and development results into new products. 

(b) Thereiore, the purposes of the Act are-

(I) to stimulate technological innovation; 

(2) to use small business to meet Federal research and development needs; 

(3) to foster and encourage participation by minority and disadvantaged persons in technological 

innovation; and 

(4) to increase private sector commercialization innovations derived from Federal research and 

development. 
73 

APPENDIXB 

Public Law No: 102-564, Signed on 10/28/1992 

Small Business Research and Development Enhancement Act of 1992 

(Enrolled Bill [Final as Passed Both House and Senate] - ENR) 

SEC. 102. FINDINGS AND PURPOSES. 

(a) FINDINGS- The Congress finds that--

(1) the small business innovation research program established 

under the Small Business Innovation Development Act of 1982 

(hereafter in this Act referred to as the' SBIR' program) has 

been a successful method of involving small business concerns 

in Federal research and development; 

(2) the small business innovation research program has been an 

effective catalyst for the development of technological 

innovations by small business concerns; 

(3) small business innovation research program participants 

have provided high quality research and development in a costeffective manner; 

(4) the innovative products and services developed by small 

business concerns participating in the small business innovation 

research program have been important to the national defense, 

as well as to the missions of the other participating Federal 

agencies; 

(5) the small business innovation research program has 

effectively stimulated the commercialization of technology 

developed through Federal research and development, 

benefiting both the public and private sectors of the Nation; 

(6) by encouraging the development and commercialization of 

technological innovations, the small business innovation 

research program has created jobs, expanded business 

opportunities for small firms, stimulated the development of 

new products and services, and improved the competitiveness 

of the Nation's high technology industries; 

(7) the small business innovation research program has also 

helped to increase exports from small business concerns; 

(8) despite the general success of the small business innovation 

research program, the proportion of Federal research and 

development funds received by small business concerns has not 

increased over the life of the program, but has remained at 3 

percent; and 
74 

(9) although the participating Federal agencies have successfully 

implemented most aspects of the small business innovation 

research program, additional outreach efforts are necessary to 

stimulate increased participation of socially and economically 

disadvantaged small business concerns. 

(b) PURPOSES- The purposes of this title are--

(1) to expand and improve the small business innovation 

research program; 

(2) to emphasize the program's goal of increasing private sector 

commercialization of technology developed through Federal 

research and development; 

(3) to increase small business participation in Federal research 

and development; and 

(4) to improve the Federal Government's dissemination of 

information concerning the small business innovation research 

program, particularly with regard to program participation by 

women-owned small business concerns and by socially and 

economically disadvantaged small business concerns. 
75 

AppendixC 

Small Business Technology Council of the National Small Business Association 

115615th Street NW, Suite 1100, Washington, DC 20005 

The SBIR Program - It Is Working! 

The SB IR program is now 28 years old, with tens of thousands of awards and many studies. What 

are the conclusions? How is it being used by the SBIR agencies? Is it successful in the 

commercialization of advanced technology? Is it being copied anywhere else in the world? Is it 

relevant in today's economy? 

• The most recent and most intensive study was a six-year analysis by the prestigious National 

Research Council of the National Academies published in 2008 by National Academies 

Press, ' which concluded: 

"By strengthening the SBIR program, the Committee believes that the capacity of the 

United States to develop innovative solutions to government needs and promising 

products for the commercial market will be enhanced." (Paragraph 1.6, page 53) 

• SBIR companies have produced approximately 25% of key innovations in the past 10 yearswith only 2.5% of the Federal R&D extra-mural budget." The 11 agencies participating in the 

SBIR program have adapted the SBIR program to their particular missions with considerable 

success. (A Google search of"SBIR Success Stories" provides over 30,000 returns.) See 

SBIR Success Stories at www.sbtc.org. 

• The commercialization success of the SBIR program is unparalleled in Federal R&D 

programs with its focus on the Phase III production outcome. According to the NAP study, " . 

. . approximately 30-40 percent of projects generate products that do reach the marketplace." 

(Page 129) This is further exemplified by the very high rate of patents generated by SBIR 

firms compared to universities and large businesses - 38% of U.S. patents for small business 

(with < 4% of the Federal R&D budget); 3% for universities (with 28% of the budget); and 

55% for large businesses (with 36% of the budget).iii For universities, it is "publish or perish." 

For small businesses, it is "patent and produce products or perish." These commercialization 

efforts produce products, jobs and tax revenue to help pay for our universities. 

• The NAP study also found that the following countries have adopted an SBIR-type programSweden, Russia, The United Kingdom, The Netherlands, Japan, Korea, Taiwan and other 

Asia countries (Page 54). A European Union policy paper has a goal of 15% ofEU R&D 

funding to SMEs.'v 

• Further, the NAP study found that the SBIR program builds meaningful bridges to 

universities: 

" ... about a third of all NRC Phase II and Firm Survey respondents indicated that there 

had been involvement by university faculty, graduate students, and/or a university itself 

in developed technologies. (Page 64) ... These data underscore the significant level of 

involvement by universities in the program and highlight the program's contribution to 

the transition of university research to the marketplace." (Page 65) 

• SBTC believes that this partnership between universities and small business is an important 

economic multiplier that is unique to the U.S. innovation strategy. We have always strongly 

supported this partnership throughout the entire 28-year history of the program.v We see the 

important successes that these strong university/small business partnerships have created in 

Silicon Valley, Route 128, San Diego, Research Triangle Park, Ann Arbor, and others across 

the country. The U.S. needs more such programs. 
76 

• The importance of these partnerships is reinforced by the NAP study of2002, wherein they 

state: 

"Public-private partnerships, involving cooperative research and development activities 

among industry, government laboratories, and universities, can play an instrumental role 

in accelerating the development of new technologies from idea to market."" 

• U.S. universities have produced 119 Nobel Laureates in the past 25 years, and they graduate 

the brilliant scientists and engineers that our innovative companies need. Small companies 

introduce the innovative products to the marketplace that keeps the U.S. in the forefront of 

technology. We need this partnership. 

i AI! Assessment of the Small Business Innovalion Research Program, National Research Council, National Academies 

Press; Charles W. Wessner, Editor. Committee on Capitalizing on Science, Technology, and Innovation: 2008; 

http://www.nap.eduJcatalog.php?record id=11989 

., Where Do Innovations Come From? Transformations in the US. National Innovation System, 1970-2006, published 

by THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION, Washington, DC July 2008. 

ji, A New View of Government. University, and Industry Partnerships, This paper was submitted by Jere Glover, Chief 

Counsel ofthe Office of Advocacy, at the Senate Committee on Small Business Roundtable Discussion on the SBIR 

program on August 4, 1999. 

<V http;llcordis.euroDa.eu/fp7/home en.html 

VA New View of Government. UniverSity. and Industry Partnerships, op. cit. 

'" Government-Industry Partnerships for the Development of New Technologies, National Research Council, National 

Academies Press: Charles W. Wessner. Editor: 2002, page 23; http://www.nap.edulcatalog/10584.html 
77 

AppendixD 

Observations on the Small Business Innovation Research Program, Statement for the 

Record of Anu K. Mittal, Director Natural Resources and Environment Team, GAO-05-

86IT; June 28, 2005. 

1. "Between July 1985 and June 1999, GAO reviewed, reported, and testified on the 

SBIR program many times at the request of the Congress. While GAO's work 

focused on many different aspects of the program, it generally found that SBIR is 

achieving its goals to enhance the role of small businesses in federal R&D, stimulate 

commercialization of research results, and support the participation of small 

businesses owned by women andlor disadvantaged persons. Participating agencies 

and companies that GAO surveyed during the course of its reviews generally rated 

the program highly." [Page 1] 

2. "High-quality research. Throughout the life of the program, awards have been based 

on technical merit and are generally of good quality. For example, in 1989 we 

reported that according to agency officials, more than three-quarters of the research 

conducted with SBIR funding was as good as or better than other agency-funded 

research. Agency officials also rated the research as more likely than other research 

they oversaw to result in the invention and commercialization of new products. When 

we again looked at the quality of research proposals in 1995, we found that while it 

was too early to make a conclusive judgment about the long-term quality of the 

research, the quality of proposals remained good, according to agency officials." 

[Page 5] 

3. "Widespread competition. The SBIR program successfully attracts many qualified 

companies, has had a high level of competition, and consistently has had a high number of 

first-time participants. Specifically, we reported that the number of proposals that agencies 

received each year had been increasing. In addition, as we reported in 1998, agencies rarely 

received only a single proposal in response to a solicitation, indicating a sustained level of 

competition for the awards. We also found that the agencies deemed many more proposals 

worthy of awards than they were able to fund. For example, the Air Force deemed 1,174 

proposals worthy of awards in fiscal year 1993 but funded only 470. Moreover, from fiscal 

years 1993 through 1997, one third of the companies that received awards were first-time 

participants. This suggests that the program attracts hundreds of new companies annually." 

[Page 5] 

4. "Successful commercialization. SBIR successfully fosters commercialization of research 

results. At various points in the life of the program we have reported that SBIR has been 

successful in increasing private sector commercialization of innovations. For example, past 

GAO and DOD surveys of companies that received SBIR Phase II funding have determined 

that approximately 35 percent of the projects resulted in the sales of products or services, and 

approximately 45 percent of the projects received additional developmental funding. We have 

also reported that agencies were using various techniques to foster commercialization. For 

example, in an attempt to get those companies with the greatest potential for commercial 

success to the marketplace sooner, DOD instituted a Fast Track Program, whereby companies 

that are able to attract outside commitments/capital for their research during phase I are given 

higher priority in receiving a phase II award." [Pages 5 & 6] 
78 

5. "Helping to serve mission needs. SBIR has helped serve agencies' missions and R&D needs. 

Agencies differ in the emphasis they place on funding research to support their mission and to 

support more generalized research. Specifically, we found that DOD links its projects more 

closely to its mission. In comparison, other agencies emphasize research that will be 

commercialized by the private sector. Many of the projects DOD funded have specialized 

military applications while NIH projects have access to the biomedical market in the private 

sector. Moreover, we found that SBIR promotes research on the critical technologies 

identified in lists developed by DOD and/or the National Critical Technologies Panel." [Page 

6] 
79 

Appendix E 

An Assessment of the Small Business Innovation Research Program, 

National Research Council, National Academies Press; Charles W. Wessner, Editor, 

Committee on Capitalizing on Science, Technology, and Innovation; 2008; see: 

http://www.nap.edu/catalog.php?record id=11989 

NATIONAL RESEARCH COUNCIL (NRC) STUDY FINDINGS: 

1. "The Small Business Innovation Research (SBIR) Program Is Making 

Significant Progress in Achieving the Congressional Goals for the Program. The 

SBIR program is sound in concept and effective in practice. With the programmatic 

changes recommended here, the SBIR program should be even more effective in 

achieving its legislative goals. 

2. Overall, the Program Has Made Significant Progress in Achieving its 

Congressional Objectives by: Stimulating Technical Innovation. By a variety of 

metrics, the program is contributing to the nation's stock of new scientific and 

technical knowledge. 

3. Using Small Businesses to Meet Federal Research and Development Needs. SBIR 

program objectives are aligned with, and contribute significantly to fulfilling the 

mission of each studied agency. In some cases, closer alignment and greater 

integration should be possible. 

4. Increasing Private Sector Commercialization of Innovation Derived from 

Federal Research and Development. The program enables small businesses to 

contribute to the commercialization of the nation's R&D investments, both through 

private commercial sales, as well as through government acquisition, thereby 

enhancing American health, welfare, and security through the introduction of new 

products and processes. 

5. SBIR Is Meeting Federal R&D Needs. SBIR plays an important role in introducing 

innovative, science-based solutions that address the diverse mission needs of the 

federal agencies. 

6. SBIR Projects Attract Significant Additional Funding. SBIR funded research 

projects enable small businesses to develop the technical know-how needed to attract 

third-party interest from a variety of public and private sources, including other 

federal R&D funds, angel investors, and venture funds. The NRC survey revealed 

that 56 percent of surveyed projects were successful in attracting additional funding 

from a variety of sources. 

7. Linking Universities to the Public and Private Markets. The SBIR program 

supports the transfer of research into the marketplace, as well as the general 

expansion of scientific and technical knowledge, through a wide variety of 

mechanisms. With regard to SBIR's role in linking universities to the market, about a 

third of all NRC Phase II and Firm Survey respondents indicated that there had been 

involvement by university faculty, graduate students, and/or a university itself in 
80 

developed technologies. This involvement took a number of forms.41 Among the 

responding companiesa. More than two-thirds had at least one academic founder, and more than a 

quarter had more than one; 

b. b. About one-third offounders were most recently employed in an 

academic environment before founding the new company; 

c. c. In some 27 percent of projects, university faculty were involved as 

principal investigators or consultants on the project; 

d. d. 17 percent of Phase II projects involved universities as subcontractors; 

and 

e. e. 15 percent of Phase II projects employed graduate students. 

These data underscore the significant level of involvement by universities in the program 

and highlight the program's contribution to the transition of university research to the 

marketplace. " 
81 

Appendix F 

Small Business Technology Council of the National Small Business Association 

115615th Street NW, Suite 1100, Washington, DC 20005 

How Expanding the STTR Program Can Instantly Create Jobs and 

Technology Clusters 

By memorandum or Executive Order, President Obama can dramatically create more jobs 

and encourage technology clusters by simply increasing the STTR (Small Business 

Technology Transfer program) program from the current 0.3 percent of the federal 

extramural R&D budget to 2.5 percent. This will not impact the budget deficit now or in 

the future. 

This expansion will force the most innovative sector of the U.S. economy, small 

businesses, to cooperate more closely with the best basic research institutions in the 

world, American universities. The STTR is a very successful. federal R&D procurement 

program specifically created by Congress in the Small Business Research and 

Development Enhancement Act of 1992 (P.L. 102-564, S. 2941, Oct. 28, 1992) to build 

bridges between universities who perform advanced research and small businesses who 

bring innovative products to market. 

The commercialization success of the STTR program has been significant - with 

commercial sales dollars by the successful companies that are considerably greater than 

the initial federal funding. The 200 I GAO report, I which looked at the early results of the 

program, showed that for the 101 companies responding to their survey, 51 had 

successful Phase III projects, with sales totals of $132 million - compared to the 

cumulative federal investment in these STTR companies of approximately $44 million -

a 3:1 return on taxpayer funds. 

Technology clusters (with cooperating research universities and innovative businesses) 

have been demonstrated to create explosive centers of job growth, innovation and venture 

capital support - such as Silicon Valley, Boston's Route 128, San Diego's 

communications and biotech communities, Research Triangle Park in North Carolina, 

and Ann Arbor/WARF, MI. Numerous studies (from David Birch in 1980s through 

Office of Advocacy, 2008) have demonstrated the job creation and economic multiplier 

effect of these collaborations between research universities and technology companies 

with their development, commercialization and marketing skills. 

The funds for the expansion of the STTR program will come from already budgeted 

federal extramural R&D funds - and at least 30% of the STTR funds MUST be spent with 

universities or similar research organizations. Since much of the extramural funds go to 

large companies, this will be a net increase for universities. Further, the STIR program 

has already developed model agreements for the management of the small company/ 

university intellectual property rights so these programs are "shovel ready" and meet the 

important research needs of the federal agencies. (See: 

htlp:lIgrants1.nih,gov/grants/funding/sbirstlr1/STTRModeIAgreement.doc) 
82 

The most significant new innovations in the marketplace have been demonstrated to 

come from small businesses - especially from STTR and SBIR firms. An important new 

study, Where Do Innovations Come From? Transformations in the U.S. National 

Innovation System, 1970-20062 reports: 

"The results show that these SBIR-nurtured firms consistently account for a 

quarter of all U.S. R&D 100 Award winners-a powerful indication that the SBIR 

program has become a key force in the innovation economy of the United States." 

[Note: the SBIR and STTR budgets combined are only 2.8 percent of the federal 

extramural budget - the rest goes mostly to large businesses and then to universities.] 

1 GAO-01-867T, FEDERAL RESEARCH AND DEVELOPMENT, Contributions to and Results of the 

Small Business Technology Transfer Program, Testimony before the Senate Small Business and 

Entrepreneurship Committee, June 21, 200 I 

2 THE INFORMATION TECHNOLOGY & INNOVATION FOUNDATION, July 2008, Washington, 

De. See: 

http://www.itif.orglpublications/where-do-innovations-come-transformations-us-national-innovationsystem-1970-2006 
83 

Chair LANDRIEU. Two-thousand-and-nine was a tough year for 

everybody. 

Mr. GLOVER. It was a very tough year for everybody. Two-thousand-and-ten, you saw—— 

Chair LANDRIEU. A better year. 

Mr. GLOVER [continuing]. Applications went up dramatically. 

Chair LANDRIEU. Thank you. I do have a couple of questions, and 

let me start with, actually, Mr. Glover. I agree with you. When my 

staff brought this reauthorization to me and said we were only basically allocating 2.5 percent, and, of course, our bill takes that up 

to 3.5 percent, but over ten years. That was my same comment. 

Why are we only doing 3.5 percent for this small business setaside, not set-aside but allocation, in this bill when there is a general understanding, and I think verified by the testimony this 

morning, that in terms of the number of patents, the innovation is 

all happening at the small business level. The backing out of large 

corporations from their own in-house research because they have 

figured out what we should have figured out—you can buy better 

technology for cheaper on the street, if you will, or from entrepreneurs out there who do not have the constraints of large businesses, than sometimes developing your own. 

So I am doing this—only increasing the allocation to 3.5%—in 

the spirit of compromise, but I am going to mention to the President personally that I think that the allocation should be higher. 

Because of the compromises, and where it is, I do not want to jeopardize our opportunity to get this moving forward. But I am going 

to be pursuing that. 

My question, Dr. Wessner, is to you. Although we have come to 

a great compromise here with many different viewpoints for this 

reauthorization, and I am very, very pleased and I thank Senator 

Snowe for her help in negotiating much of this with me, but we are 

still getting some push-back from universities that basically see 

small business as a threat. They say to me, Senator, we are the 

ones that do all the research. We do not think small business 

should be taking more federal research and developmental funds, 

even though this is a very small portion. 

And in my experience, I have been trying to explain to them, and 

this comes from Roy Keller who runs our technology transfer in 

Louisiana, he says between 50 to 60 percent of all Louisiana’s SBIR 

have university involvement, and we are not one of the higher 

states. We are more modestly engaged in the program. I would like 

us to be more, and I intend to see that happen. But he says, we 

work with the universities and the small businesses in our state. 

About 50 to 60 percent of our proposals have some type of university connection. So I am confused about why some universities see 

this as universities versus small business as opposed to partnerships, which I think are the most important. 

So my question is, from your experience, how do you see the connection between small business and universities, and in your own 

experience, do you not find that there is some real common ground 

here? 

Dr. WESSNER. The short answer, ma’am, is yes. There is common 

ground. I think we have to remember that old adage, what you see 

depends on where you sit. When you ask the head of, or the vice 
84 

provost, for research in a major university, he will explain that 

SBIR takes his money from his programs. But then walk down the 

hall to the vice provost for commercialization, and he will explain 

to you that SBIR is one of the most valuable tools we have to convert our research into products for the marketplace. 

I think the universities are misguided in opposing this. I have 

often told them, sometimes in heated discussions, because we are 

from the Academy of Sciences and we do favor higher research 

budgets for universities. In fact, let me repeat that. The best way 

to calm some of this is to actually push our research budgets up. 

That has a double beneficial effect for this program, first, because 

you increase the amounts available, but also it provides the space 

for everyone to participate. 

So the universities are a little bit schizophrenic. On the one 

hand, they value it for the commercialization. On the other hand, 

they obviously want more funds for their research. 

What I would suggest you point out to them, what is the most 

compelling story to a Senator or to a Congressman, that there is 

a brand new publication in a peer-reviewed journal or that there 

are 25 people working in a new company called Qualcomm in their 

district? I think that latter story is the most effective. It shows how 

we convert research into jobs and into growth and into technological capacity and, indeed, into national security. 

Chair LANDRIEU. My second question is, there was some concern, 

I think that we have tried to address it in our reauthorization, but 

some that looked at this program, and it has been alluded to in 

some of the testimony, there was a practice some people called mill 

riding, which is that some companies or some start-ups were getting grant after grant after grant and not ever reaching commercialization. However, I thought what I heard from Dr. Silver was 

that his enterprise has received multiple grants from a variety of 

different Federal agencies. He has found it to be very beneficial. 

So how do we ensure accountability to the taxpayer by allowing 

these innovators to be exactly that—innovative, searching, getting 

different grants from different Federal agencies—but making sure 

that we are giving value to the taxpayer. At some point, that effort 

is either shut down because it is not going to be successful or encouraged to be another Qualcomm? 

Dr. WESSNER. We have an article I would be happy to submit, 

both from the text of our reports—it talks about the myth of the 

mills. Basically, this is an urban myth. There are a very limited 

number of high-volume multiple awardees. Keep in mind, as a program goes past 25 years, it should not be a real surprise that there 

are more and more companies with more and more awards. 

[The information follows:] 
AN ASSESSMENT OF 

SBIR PROGRAM 

CommiHee for 

Capitalizing on Science, Technology, and Innovat

An Assessment of the Srt:loll Business Innovation Researc

Policy and Global Affairs 

Charles W. Wessner, Editor 

NAnONAl RESEARCH COUNCIL 

OF THE NATIONAL ACADEMiES 

THE NAnONAl ACADEMIES PRESS 

Washington, D.C. 

www.nap.edu 
220 AN ASSESSMENT OF THE SBIR PROGRAM 

the question of whether the size of awards should be increased. But this is not a· 

simple question. Related questions include: by what amount? One·time only or 

possibly tied to inflation? Both Phases? At all agencies? 

The primary justification for raising the nominal limits is that the cost of 

research has increased with inflation, and hence that these limits do not buy the 

agencies the same amount of research results that the Congress intended when 

this guidance on award size was first introduced. 

Agency staff have offered a range of additional justifications for larger 

awards. At NIH, which has been most active in experimenting with larger awards, 

justifications include the need to focus on the highest quality research, the like. 

lihood that more funding will lead to more commercial success, the impact of infiation, the need to support companies through regulatory hurdles, and the 

sibility that higher funding levels will expand the applicant pool by attracting, 

in particular, applicants who currently believe SBIR is too small to 

justify the effort to apply. Finally, and not insignificantly, there is a relatively 

higher overhead cost of administering more, smaller awards. 

The latter is tied to the minimal administrative funding for SBIR, discussed 

below. The other NIH-specific points are discussed in the NIH volume. 

Awardees in interviews have also favored larger awards-until they are 

asked to make an explicit trade-off between the size of awards and the number of 

awards, At that point, awardees often become tess supportive of larger awards, 

There are also arguments against larger (and fewer) awards. Because it is extremely difficult to predict which awards will generate large returns (commercial 

or otherwise), it may be wise to spread the awards as widely as possible. SBIR 

awards also playa critical role (described in Chapter 4: SBIR Program Outputs) 

in supporting the transition of research from the academy to the market place, 

This kind of motivation may not require more than the existing level of support. 

There is as yet also no evidence to support the assertion that larger awards generate larger returns, although further analysis at NIH might test that connection, 

If we conclude-as we do-that the SBIR programs at the agencies do work 

as intended by Congress, and do generate significant benefits, we should recommend change only with caution. It therefore seems that while there is a case to 

increase award size, there are risks involved, and it would be prudent for agencies 

taking this step to increase the awards incrementally over, perhaps. three years 

to avoid a sharp contraction of the program and to allow hope for increases in 

R&D funding to mitigate the impact on applicant success rates of increasing 

award sizes. 

5.9.6 Winners 

Multiple-award winners do not appear to constitute a problem for the SBIR 

program at any agency. At all agencies except DoD, only a limited number of 

PROGRAM MANAGEMENT 

companies win a sufficiently large number of awards to meet ev

definition of a "mill." 

Even at 000, we find arguments aimed at limiting a company

in SBIR to be unconvincing, for a number of reasons: 

(1) Successful Commercialization. Aggregate data from t

mercialization database indicates that the basic charge a

i.e" no commercialization, is simpJy incorrect. Compani

most awards are on average more successful commerciali

winning fewer awards. 

While data from this source are not comprehensive, th

vast majority of MAWs-and the data indicate that on 

with the largest number of awards commercialize as 

than all other groups of awardees; that in the aggrega

MAW problem of companies living off SBIR awards. 

(2) For some multiple winners, at least, even though they c

a considerable number of awards, tbe contribution of S

revenues has declined,46 

(3) Case studies show that some of the most prolific award 

successfully commercialized, and have also in other ways 

of sponsoring agencies, 

(4) Graduation. Some of the biggest Phase II winners have g

the program either by growing beyond the 500-employ

being acquired-in the for example

owned firm. Legislating to solve a problem with compan

any event no longer eligible seems inappropriate. 

(5) Contract Research. This can be valuable in and of itsel

indicate that SBIR fills multiple needs, many of which d

in sales data. For example, efficient probes of the technol

conducted on time, on budget, to effectively test technic

may save extensive time and resources later, according to 

(6) Spin-offs Some MAWs spin off companies-like Op

Creare, and Luna. Creating new finns can be a valuable c

(7) Valuable Outputs. Some MAWs have provided the high

flexible capabilities needed to solve pressing problems ra

(8) Compared to What? Agency programs do not impose li

to see why small businesses should be subjected to limits 

of awards annually when successful universities and pri

are not subject to such limits. 

MiA! Radiation Monitoring, for example. SBm has fallen steadily and is now 

total finn revenues. 
222 AN ASSESSMENT OF THE SBIR PROGRAM 

All these points suggest that while there have been companies that depend 

on SBIR as their primary source of revenue for a considerable period to time 

and there are some who fail to develop commercial results, the evidence strongl; 

supports the conclusion that there is no multiple ,winner problem. Moreover: 

those who advocate a limit on the annual number of awards to a given compan; 

should explain how this limit is to be addressed across multiple agencies, and 

why technologies that may be important and unique to a given company should 

be excluded on thiS basis. 

Given that SBIR awards meet multiple agency needs and multiple 

sional objectives, it is difficult to see how the program might be enhanced by 

the imposition of an arbitrary limit on the number of applications per year, as is 

currently the case at NSF. However, if agencies continue to see issues in this area, 

they should consider adopting some version of the DoD "enhanced surveillance" 

model, in which multiple winners are subject to enhanced scrutiny in the context 

of the award process. 

5.9.7 Information Flows 

toward Web-based information delivery has occurred unevenly 

DoD has perhaps moved farthest; along with NASA, 

it was the first to require electronic submission of applications, and the 

received by awardees: 

is strong, It is, moreover, well integrated with 

with two innovations in particular being weIlThe Period, 

along with contact information 

tial applicants to directly detern 

fit with the agency's needs, and 

cations, so they are a better fit. ' 

specifically to the technical officers running a 

in the end, also make finding decisions. 

The Help Desk, which is staffed by contractors and is dehlgned 

non-technical questions (for example about contracts and 

staff with relevant experience in the SBIR program, who 

these materials better than topic authors for example. PI< 

at NIH and NASA have complained in interviews that SBIR 

require much more help than academic applicants for other ldnds 

awards. Some of that burden might be alleviated with a better resourced 

help desk function.47 

47This is a correction of the text in the prepublication version released on July 27,2007. 

size of the program, the clear interest exhibited 

economic development st and the increasingly positive view of SBIR 

universities, suggest that know e about the program is increasingly be

potential applicants. The of the Internet-and the high qual

lelOped by the agencies-mean general interest can be transla

""."VI" <InA ;n",Ynp,n<livelv for bot nlicants 

every agency every year. 

Thus it appears that the general outreach function 

SBIR Agency CoordinatorslProgram Managers may nc 

more nuanced and targeted role, focused on enhancing 

served groups and llnderserved states, or on specific aspects of the 

(e.g., the July 2005 000 Phase III meeting in San Diego}-while relyin

Web and other mechanisms to meet the general demand for infonnati

seems entirely appropriate. 

5.9.8 Commercialization Support 

il( agencies have been working to support the commercia

companies for a number of years, this has clearly b

higher priority most agencies in the recent past. Congress has always 

ted agencies to s d a small amount per award ($4,000) on commerci

support, and most age les have done so. 

Commercialization s ort appears likely to have a significant pa

the agencies, partly because any SBIR finns have limited commercia

ence. They are often founded by ientistS and engineers who are focuse

technology, and interviews with a dees, agency staff, and commerci

contractors all indicate that the busine side of commercial activities 

where companies experience the most di lty. 

Important recent initiatives include the ex sive set of services pro

Navy through the TAP, and the NIH commitmeflt-to roll out the CAP 

These add to the long-running program at DoE. ....... 

It is important to understand that the character of 

quite fundamentally between DoD. NASA, and the remaidiqg nonpro

agencies respectively (DoE is partly a procurement agency, buNor our 

here, it purchases such a small amount of SBIR outputs for intemar. ons

that it is best grouped with the nonprocurement agencies). 

At 000, where the agency provides a substantial market if comp 

find a connection to the acquiSitions programs, the critical focus of 

cialization is on bridging the gaps to adequate Technology Readinesand on finding ways to align companies with potential downstream ac

programs. 
88 

When MIT gets a large number of awards, this is good, just, and 

right, and indeed, it probably is. When Lockheed Martin gets lots 

of major contracts, this is good, just, and right. When a small company gets a number of $100,000 awards—— 

Chair LANDRIEU. There is something wrong. 

Dr. WESSNER [continuing]. There is something wrong, and I very 

much am in tune with Jere Glover on this point. I think it is just 

a question of bias. But the facts are, there are not. Many of them, 

they graduate, they are acquired, and by the way, when you have 

a problem that the Hubble Telescope is not working, actually, you 

want to go to Creare and ask them if they can figure that out for 

you, given the capacity they have built up by these multiple 

awards, and they do that job. 

Some of them grow. Some of them are effective contract research 

organizations. But the question you have to ask the critics is, compared to what? Where else is the government going to get the benefits of the innovation that small companies bring? Where else are 

we going to have small companies that work so closely with universities, often are directly from the university working with the graduate students? This is, quite literally, one of the great strengths of 

the American system, our ability to pull from the public sector into 

the private sector and solve social problems, solve security problems, and help our companies grow. 

It is a myth, Madam Chairman, that the mills are a problem. 

Chair LANDRIEU. Thank you. 

Dr. Jacobs, did you want to add something, and then I am going 

to turn it over to the Ranking Member for her questions. 

Dr. JACOBS. I would like to just note that Qualcomm, back in the 

mid-1980s, did receive several Phase 1 and then several went on 

to Phase 2. So we did have a number of different SBIR awards. 

Some did not lead to ongoing job creation and new technology, but 

some did and had a major impact. And so taking that risk, allowing 

it to happen, not officially constraining the number of awards being 

given to a given company, I think, is beneficial. 

Chair LANDRIEU. I might add that this is one of our tremendous success stories. Qualcomm, I understand, paid more than $1 billion 

in taxes in 2010 alone. That completely funds the SBA for a whole 

year, the entire SBA for the country. So, Senator, all we need is 

one big success in this program, and it returns all the money we 

potentially could have lost. 

Senator Snowe. 

Senator SNOWE. Well, I am sure Dr. Jacobs would agree with 

that. 

[Laughter.] 

You have unanimously, I think, given strong confirmation and affirmation of why these programs are irrefutably successful and 

have grown over the years and have contributed so much to our nation’s economy. I wish all of our colleagues could hear your testimony here today because it is so important in making distinctions 

from one program to another. Clearly, these are distinctions that 

everyone would embrace. Irrespective of what side of the political 

aisle you are on or what your views are about Federal spending, 

these programs work, as you said. And I certainly want to make 

sure that we impart that to our colleagues, but I think that the 
89 

data that you have given here today and the evidence is clearly 

substantial and we will have to make sure we impart that to our 

Senate colleagues when we are debating this legislation. 

There are several issues that are facing us as a nation. One, of 

course, the paramount issue is job creation, and unfortunately, we 

are at a point where it is just simply stagnating for all practical 

purposes. We only created a net 70,000 jobs between June of 2009 

and December 2010. So when I look at, for example, the SBIR program, making connections with these programs with job creation, 

one of the startling figures is that we know that small businesses 

create about two-thirds of all the net new jobs in America, but 90 

percent of that job growth comes from four to five percent of the 

firms, and that is what SBIR, for example, really does target. It is 

really targeted towards those types of companies that are willing 

to take the next step in research and innovation. 

Is there any way for us to estimate what you think might be the 

amount of job creation from these programs over the next eight 

years? Mr. Glover, could you? 

Mr. GLOVER. One of the sad things about data analysis is we always look at the last issues. We were concerned about commercialization so we tracked very carefully commercialization on the 

SBIR program. Roughly 50 percent of all of the technologies coming 

through Phase 2 get commercialized. But nobody thought about 

jobs, so we do not have clear records. We did survey the accelerator 

program, DOE’s participants, and found that they were going to increase jobs dramatically. Now, that is a prospective study. We are 

going to go back and do that in a year or two. 

When you innovate and you expand and you have sales and commercialization, you have job creation, but we do not have good, 

clear documentation of that and that is something we ought to be 

capturing. 

Senator SNOWE. Dr. Wessner and Dr. Jacobs, as well. 

Dr. JACOBS. Yes. One of the things I would like to point out is 

that often you are constrained on how fast you can add jobs because a number of the people are not properly trained. I think that 

the emphasis also on improving our educational system and allowing more—and encouraging more students to go into the subjects, 

in particular engineering technology, science, is very critical. And 

so I know during our early years, we were constrained because of 

finances and also because of ability to attract new people. 

Senator SNOWE. Dr. Wessner. 

Dr. WESSNER. The program does create jobs and our research 

supports that. I think your initial emphasis on the role of small 

companies, per se, there are many factors that come to play. If you 

have people with enormous competence like the gentleman to my 

right here, sometimes the SBIR awards are a surrogate for effective management because it is that management, it is that conception of the technology, it is the research investments we have 

made. It is the whole innovation ecosystem which deeply involves 

the research and the training function. 

So I find it a little hard at times to say, well, you see, they got 

this award so that explains why Qualcomm has 17,000 jobs. There 

are some, needless to say, some other factors at play. But do they 
90 

support companies at a critical phase and do those companies add 

jobs? Yes. 

Senator SNOWE. Yes, Dr. Silver and Mr. Hernandez. 

Dr. SILVER. I just anecdotally want to make a quick point, is that 

dollar for dollar, I would say that the SBIR program likely produces, and the others might have better statistics, but likely produces far more jobs than the average program. If I take our company as an example, a lot of us are really passionate about what 

we are doing. We are not necessarily spending all the money on 

market-rate salaries, let us put it that way. We are spending the 

money on what it is going to take to get the products out, and I 

think that is going to be the case across the board with SBIR recipients. 

So if I would look at a way to get the biggest bang for the buck, 

it would be putting the money towards small businesses if you are 

looking for job creation. 

Senator SNOWE. Thank you. 

Mr. Hernandez. 

Mr. HERNANDEZ. I would actually echo those sentiments in the 

fact that when, in our experience, the way we have approached the 

SBIR program is that when we put a grant together, we usually 

put a new head count on that grant. In other words, we will allocate a percentage of salary to a potential new hire. These are usually projects that we do not currently—are invested in the company. These are usually higher-risk projects. So we would like to 

bring in new head count to address those projects. If they move beyond the de-risking stage, then we invest additional capital, either 

from our venture pile of capital or from other additional sources. 

So there is no statistics, but I would argue that in my experience, 

at least in the biotech industry, this is the way it is done. 

So I would argue that if you had a one-for-one new job created 

opportunity with these programs, I think would be immense success. That has been my experience. 

I want to just mention a little bit, the comment earlier about mill 

riding and—it is really interesting, because when we first started 

the company, we looked under every rock for dollars, and oftentimes it required us to write multiple SBIR grants, many of which 

were not awarded for I do not know what reasons, but they were 

not awarded. So the notion that multiple grants need to be written 

is really part of the process for us, for new company creation and 

new technology risk taking. 

The reality is that the portfolio theory applies here. You are 

going to write ten grants. You perhaps are going to get a couple 

of those, if you are lucky. Some of those products will die on the— 

they will just die on the vine. That is just the way the business is. 

But it is that one success that moves beyond that early stage that 

allows us to then convince the venture capitalists that there is a 

real merit here to what we are doing, and that is an important one. 

So I would not be biased by the notion that companies apply to 

multiple grants. I do not think that is viable. The market corrects 

this. If the company is not viable, the company will not survive. So 

I would not be biased by that position. Thanks. 

Senator SNOWE. Thank you. 

Chair LANDRIEU. Senator Cardin. 
91 

Senator CARDIN. Thank you, Madam Chair, and I thank all of 

our witnesses. We are very interested in this area for many reasons. The work that you do makes us safer, healthier, more economically competitive, but it is all about jobs, also, creating jobs, 

and I could not agree with you more. I think one of the reasons 

why Maryland has a lower unemployment rate than the rest of the 

nation is that we are heavily endowed in technology firms. It is not 

just the triangle between Baltimore, Washington, and Frederick, 

but in the Western part of our State, the Northern part, Southern 

part, Eastern part, we are finding technology firms that are developing. 

But I just really want to underscore the point that our Chairman 

made, and I think the accomplishment we got last year in getting 

the SBIR bill through the Senate, we were able to find the sweet 

spot between the different interest groups that have been very 

heavily engaged on this bill. And if you do not think the universities and large technology firms have some sway here, take a look 

at the Recovery Act and see the exemption that was put in for the 

SBIR programs. That was a major disappointment and it came 

out—we are still wondering to this day how that came about. 

But I think the point that you mentioned, Mr. Wessner, about 

the universities, I am puzzled as to why. I mean, I look at our two 

great academic centers, the University of Maryland and Johns 

Hopkins. Both are expanding in Montgomery County because of the 

technology firms that are there, and they are the small technology 

firms. Mr. Hernandez, you pointed out that you not only have a 

good relationship, I think you license technology from the universities in order to get your work done. So that collaborative effort 

is clearly feeding on each other. The university structure is stronger because of the innovative small companies that are willing to 

take risks. 

And I am going to get around to a question to you, Mr. Hernandez, because at the end you said you supported the compromise 

that we reached last year and I want to make sure you still feel 

that way, because we reached a compromise that truly was a compromise. It was not as much as I think some of the smaller companies would have liked to have seen, but it at least put you in the 

ballgame. You were able to use venture capital as part of your ownership. 

I was just impressed by your typical example of a small technology firm of less than 50 employees, has no product on the market and needs to deal in hundreds of millions of dollars, that needs 

to find angel investors and venture capitalists if they are going to 

be able to have any chance of succeeding and obviously need multiple sources of financing and the SBIR can be critically important 

to the success of that venture. Are you still satisfied with the compromise we reached last year in the Senate? 

Mr. HERNANDEZ. I am assuming that question is directed at myself. 

Senator CARDIN. Yes. Yes. 

Mr. HERNANDEZ. Okay. 

Senator CARDIN. I always pick on Marylanders. 

[Laughter.] 
92 

Mr. HERNANDEZ. We obviously have a great appreciation for the 

State of Maryland. They have been utterly supportive to the 

biotech industry. We are very, very honored to have amazing relationships with Johns Hopkins and the University of Maryland. I 

actually serve as Entrepreneur in Residence for the University of 

Maryland-College Park and that entity is one of the most supportive entities I have dealt with in my career. MIT has been another entity where I spun out a company out of and actually 

housed it in College Park. They have a great incubator there. 

So this fight that exists in this—I do not experience it. I do not 

see that. I think it is really a collaborative effort. And maybe that 

is a byproduct of where we are located. 

You know, with regards to the compromise, you know, we support the Senate passing this bill. The work that you guys do is 

magic to us. We let you guys do that work. We really—we just 

want to build, done, right. I think it is imperative that we do that. 

We will let you guys do the work that you do. 

You know, this other comment about the venture community is 

really an important one that we have to understand here. The venture community has been on the sidelines for a couple of years. The 

market has really shook them up quite a bit. It is imperative that 

we bring them back to the table, if you would. 

One way to do that, in my humble opinion, is to make sure that 

you provide technologies that have been somewhat de-risked, and 

here is what I mean by that. It turns out that in a due diligence 

process of a company, when you are an investor, and I have been 

an investor in companies, as well, oftentimes, if a company has an 

SBIR, we view that as a merit. It is an important due diligence 

process that exists. 

So creating and allowing companies to compete in the SBIR program in collaboration with universities brings capital to the table, 

and I think that that is an important relationship that needs to be 

highlighted further, and maybe this is not the right forum in terms 

of an SBIR, but the corporate academic relationship is critical to 

success. It has been critical to successes of our companies. So it is 

really imperative that we get a bill done. 

Senator CARDIN. We feel the same way. Thank you. 

Thank you, Madam Chairman. 

Chair LANDRIEU. Thank you. 

Dr. Wessner, let me ask you this, since you have done most of 

the studies on how the program operates. It occurs to me that for 

the program to be as effective as it could possibly be, that the expertise and quality at each agency and at the SBA to run a quality 

program, whether it is within NASA or NIH. Comment to us, and 

I am sure it is included in your testimony, but for the record, just 

to reiterate, what is your assessment of how the individual agencies or departments actually run their programs and identify some 

of the quality grants that come in. I realize that you have all testified that the time is too long in terms of decision making, so we 

are trying to shorten that up. But the overall leadership, I guess 

I am asking you, of the program currently, how would you define 

that, Doctor? 

Dr. WESSNER. How well are the people who are dealing with it 

every day doing? 
93 

Chair LANDRIEU. Yes, doing it and identifying, you know—— 

Dr. WESSNER. Well, I—— 

Chair LANDRIEU [continuing]. And how is the Federal Government doing at actually hiring the right people in those positions? 

Dr. WESSNER. Well, I think the administration deserves a lot of 

credit for a revitalized SBA. Karen Mills and the Associate Director, Sean Greene, have brought intelligent policy attention to this 

area and I think they have been a great credit to the program. 

I honestly think, in general, that the quality of the people involved with the SBIR program is among the highest in the government. They have some really good people. Now, that does not mean 

that the whole team is perfect, but we are talking about human endeavor here. But overall, I would give them very high marks. 

I think, if you would appreciate the humor, I think they do very 

well and I think they need to do better, and the way they need to 

do better is by having less—more incentives. One of my colleagues 

from the Defense Department remarked to me the other day that 

there are only—I think there are only two people who have SBIR 

in their performance evaluation in the Department of the Army. 

The question is, who is actually responsible for making the program work? 

I would urge, particularly those from your membership who are 

going to the Armed Services Committee, to vigorously remind the 

leadership of the importance and the value that Congress attaches 

to the program. 

So are we running the program well? Yes. We have 37 pages of 

recommendations of how to run it better, many of which appear in 

this bill and many of which have already been adopted by the 

agencies. And I would stress, that consultative process of having an 

evaluation in process has proven very helpful to the innovation and 

the management of the program. But cutting the paperwork, reducing the cycle times is probably the most valuable thing—as valuable as increasing the overall size of the program. I would stress 

that. 

Chair LANDRIEU. I am going to ask all of you this and then I will 

be finished with my questions and turn it back to Senator Snowe. 

We have a vote at 11:50, I believe. But as I look at the awards 

across the country, there are obviously clusters of awards, most notably in California, Massachusetts, and several other States. Unfortunately, Louisiana is not in one of those clusters. And I realize 

that this is highly competitive and we want there to be the flexibility for the money to follow the best science and best innovation. 

But some of you have alluded in your testimony to sort of the lack 

of awareness or that there are either areas of the country or enterprises in the country that are not as aware as others about this 

program. 

So my question, and we could start with you Jere and go this 

way across the panel, if there were one or two—first of all, do you 

think that this program is well understood and well known uniformly throughout the country? If not, how could we do a better 

job, either this committee, Congress, or organizations, states, local 

governments, business organizations, telling people about it? So I 

am sort of searching for best practices, and you can all take just 

maybe 40 seconds to say what you would suggest to us. 
94 

Mr. GLOVER. There is clear record that where money is spent, 

matching with the States to get outreach and education, the number of awards in States goes up. There is a clear correlation between that, and we have gone back and looked at it. When we 

dropped the FAST and rural outreach, we have seen the have-not 

States, as I refer to them, numbers decline. So that is number one. 

Number two, there is going to be some administrative money. I 

certainly expect and hope the agencies will use part of that to do 

outreach, training, and working around the have-not States, including national conferences in have-not States that cannot afford to 

run a whole conference, to make sure that gets done. 

And the number one priority for the agencies should be, as it 

used to be, to get outreach into those have-not States and make 

sure. There is just as bright, just as competent, just as good technology in the rest of the country as there is in California and Massachusetts. The fact that there is not an infrastructure does not 

mean that the people are not as bright and the technology is not 

as bright. So I would encourage that and make sure that some of 

that administrative money gets spent to do outreach and training 

and education. 

Chair LANDRIEU. Thank you, Jere. 

Joe. 

Mr. HERNANDEZ. Yes. I do not know that it is an issue of the lack 

of knowledge of the program. I really believe that it is an issue of 

process and the challenge involved in putting these applications together. The size of the awards is another, I think, driver. It turns 

out oftentimes you spend more money on consultants putting this 

thing together when you need supporting documents than the 

award itself is worth it. 

The other thing I think is really important and would really increase the quality of applicants, and, I would argue, the number of 

applicants, is really this issue of providing access to the VC-backed 

companies. It is really an important angle that I think needs to be 

addressed in whatever compromise comes out of this. It is really 

imperative that we increase the quality and the number of applicants. 

But in terms of marketing the program, I think it is a great program. The market knows about it. I would just encourage that we 

need to make it a simpler, more inclusive process. 

Chair LANDRIEU. Dr. Silver. 

Dr. SILVER. Thank you. Yes, from my perspective, I can say that 

I learned about the program because I was consulting for another 

firm that received funding under the program, and I do not know 

that I would have known about it otherwise. So that suggests that 

at least there is sort of a feedback loop there and things can start 

concentrating in certain areas. 

I would say that one of the points that I want to make is that 

with respect to innovation more generally, it really does not happen 

just because of funding. It happens—Mr. Glover pointed out the 

concept of an infrastructure. It happens because there is an ecosystem of people that are interested in starting new companies that 

hear about things, and what I would urge is that the program 

think of a way or find a way to be part of that broader ecosystem. 
95 

And some concrete specific examples are there are a lot of business plan competitions that are starting around universities. That 

is something that could be tapped into. There are a number of 

other competitions that are nationwide. We were able to win a nationwide competition out of MIT, but there are some at Rice University in Texas. There are a number of others. 

So my point would be that think about the broader ecosystem 

and get the program associated with universities or places where 

there are going to be people that are excited about early stage 

firms. I think it could really have a big impact. 

Chair LANDRIEU. Dr. Jacobs. 

Dr. JACOBS. Yes, I think you will find that a lot of these clusters, 

or certainly a lot of the small businesses in the high tech area, 

biotech area, start up around good research universities, and so 

this issue of there being a separation between the universities or 

a fight between the universities and the SBA on these SBIRs, that 

should not be the case. It seems to me that going in and working 

with the universities, making sure that these days the students 

that are, in fact, very interested in entrepreneurial futures, that 

they are aware of this program when they do go out. 

As far as being able to spread it further, again, I think that it 

is important to provide more funding into the universities because 

that just, again, has a very large multiple. 

And so where there is a good university, I think you will find a 

number of companies. It is important to let those companies know 

that these programs exist. The other is to spread it further, I think 

you just have to get better education. 

Chair LANDRIEU. Dr. Wessner. 

Dr. WESSNER. Could I just concur with that. It is very important 

to train the cohorts if we do not do the university investment. But 

once you are doing that, outreach to women and minorities is really 

important and we are trying to develop some work on that in the 

Academies right now. 

Your FAST program needs to be not only in the law, but it needs 

to be funded. I mean, a few million dollars just does not do it, and 

I would urge that you make that a substantial program. We have 

not been able to research that, but everyone we talk to disproportionately stressed how important that was. 

So I think, and particularly for the disadvantaged States, although I would remind you, Madam Chairman, that one of the key 

variables is applying. So talking to the universities, reaching out 

to them with prizes and with a culture—you might want to explore, 

could you offer small funding to the universities to advocate for the 

program? One of the key things is changing the culture inside the 

institution so that they understand they can do this. It does not 

have to just be football. 

Chair LANDRIEU. Senator Snowe, anything? 

Senator SNOWE. Just one question. On flexibility, do you think 

we have incorporated enough in here? I know, Dr. Wessner, your 

report indicated that is one of the strengths of the program, so do 

you think our legislation does enough in that regard, to give the 

agencies flexibility in how they administer it? 
96 

Dr. WESSNER. Well, Senator, that is—it is important to reauthorize the program, and this is good legislation and it has got a good 

compromise. And if you can pass this bill, that would be good. 

Senator SNOWE. Okay. 

Dr. WESSNER. Do we think that—I would urge, in general, to 

both of you, Ranking Member and Chairwoman, that you need to 

instruct the program managers, whether you are talking about 

mills or whether you are talking about caps. I mean, I would ask 

and challenge your committee. If the scientists at NIH really think 

a cervical cancer product should have a large award to do it now, 

does the committee in its wisdom really believe that they are 

wrong and that you should tell them how much they are allowed 

to give? 

And could I point out that what happens when you do that? Well, 

they will just give multiple awards. I mean, you know, it squeezes 

out on the sides. You cannot—but the scientific opportunity, we 

would argue, should dominate with a required clear statement of 

what the justification is and with the SBA checking up. What did 

you do? What happened? So making them justify and making them 

evaluate, to our argument, is better than fixed amounts. 

Senator SNOWE. Well, I suppose you could have a waiver in some 

instances. 

Dr. WESSNER. If you can have an active waiver, then I would 

withdraw the concern. 

Senator SNOWE. Yes. 

Dr. WESSNER. As long as it is in a—— 

Senator SNOWE. No, because you are right. If there is an instance 

where there is X-amount of money and there is a rationale and 

data to document that X-amount of money could make the difference in producing a result—— 

Dr. WESSNER. But our report which addressed this did not argue 

that they should just be able to give $3 or $4 million to a company 

and just do it. 

Senator SNOWE. Right. Well, we ought to look at that. That is an 

interesting point, actually. I understand what you are saying. It is 

compelling. 

Any other—Dr. Silver, I know you dealt with multiple agencies 

for different departments, did you not, four or five? 

Dr. SILVER. Yes, I did. 

Senator SNOWE. Yes. So is there any one that does a better job 

than the other, or am I putting you on the spot? 

[Laughter.] 

Dr. SILVER. There are sponsors here. 

Dr. WESSNER. You are on the record here. 

Senator SNOWE. Okay. 

[Laughter.] 

Dr. SILVER. No, I do want to say that one agency that we have 

enjoyed working with a lot is the NSF, that they have reduced paperwork enormously and they have got sort of approaches to overhead that for a small business is very useful, particularly having 

a safe rate for a small business, those kinds of things. 

Our goal is really to get products out as quickly as possible. We 

do not want to be doing a lot of bureaucratic work. And so I think 
97 

that something in the legislation that focuses on that would be very 

helpful for a lot of businesses. 

Chair LANDRIEU. And can you repeat that? Do you mind if I ask 

about they are sensitive to the overhead rate, go into a little detail 

about that? 

Dr. SILVER. Sure. There is what is called a safe rate. I believe 

for the NSF, it is 50 percent, below which—if you have an overhead 

rate of that or below in your application, you are okay. They are 

not going to go back and ask you for detailed multi-year background of how you calculated that overhead rate. And those kinds 

of approaches—in fact, that is a really good deal, I would argue, 

for the government because our overhead rate is probably higher 

than that, but we would rather just use a safe rate. So—— 

Chair LANDRIEU. Oh. I see what you are saying. 

Dr. SILVER. That is just an example of particularly—and I am 

speaking from the perspective of early stage innovation. I would 

really urge a distinction between very early stage and maybe a 

running company that has 400 people and it is selling products and 

needs a little extra capital. 

Chair LANDRIEU. Right, because in the front part, it is mostly 

salaries, right? It is mostly going to be salaries for the one or two, 

just, you know—— 

Dr. SILVER. Yes. Yes. 

Chair LANDRIEU [continuing]. Paying your light bills and your 

food bills, not to cut into your time—— 

Dr. SILVER. Exactly. 

Chair LANDRIEU [continuing]. But until you can get something 

going. That is a very good point. 

Joe, do you want to add anything? 

Mr. HERNANDEZ. Yes, let me just—I mean, I think making the 

process as efficient as possible is really the goal here. You know— 

this is not BIO’s official opinion, by the way. This is Joe’s opinion, 

and I am biased because I am a reviewer for NSF. But I would 

argue that NSF has really created a really good model to streamline the process, and I think, again, it is this question of it is 

$100,000. Do you really want your people spending all this energy 

and writing grants, getting consultants to support your data, doing 

additional research? When you really look at the grand scheme, if 

you do not get a Phase 2 program, it is really—there is really an 

expensive endeavor. 

So to the extent that that process can be made shorter, to the 

extent the process can be quicker in terms of providing peer-reviewed objective feedback on the work, and that is a challenge because these—oftentimes, when you do not get a grant, the feedback 

that comes back sometimes is counterintuitive and there are even 

dissenting opinions amongst the opinions that you get back. So 

there has got to be a better process, of course. But I would argue 

that making the size of the award significant and making the process faster would really be an important piece of it. 

And again, coming back to this, you know, how do you increase 

the quality of the applicants, you have got to let venture-backed 

companies into the process. It is imperative. That is how you are 

going to increase and create more value out of the effort. 

Chair LANDRIEU. Jere. 
98 

Mr. GLOVER. You mentioned agencies. I would point out, too, 

Navy and Defense Department does a much better job of follow-on 

and transmitting technology. I know the other departments are 

working on that and trying, but Navy clearly is the model of excellence, and DOE has done more in the past year than anybody else. 

They created a Phase 3 accelerator program. They took their Recovery Act money, put out a whole new solicitation, got it out on 

the street, did it in record time, record efficiency. I would point out 

those two agencies, to answer your question. 

Senator SNOWE. Jere, can I just ask you one question about SBA. 

What do you think they could be doing to promote these programs? 

Is there anything? 

Mr. GLOVER. I think SBA has taken more leadership. It is still 

not where it was years ago. There is a lot of role models and leadership. They are making great strides. They are getting back. But 

under Maury Swinton when he was head of the Office of Innovation Technology, they basically did a lot of real guidance and leadership and I think that is going to be important, and we are seeing 

that happening now. 

Senator SNOWE. Okay, great. Thank you all. Oh, yes, Dr. Jacobs? 

I am sorry. 

Dr. JACOBS. On that point, there was another San Diego company as well as Qualcomm that was inducted into the Hall of Fame 

for the SBIR program and I think that, in fact, it was an SBA Administrator that made us aware of the program at the time. It was 

a very active Administrator, did make sure that we all understood 

these programs existed. He watched out for companies that were 

kind of in a start-up phase. 

And I might mention one other thing. It sounds like there has 

been some requirement creep over the years, because I remember 

this being a very straightforward, very simple process to get a proposal in and very quickly get an answer back and it sounds like 

that has changed dramatically. 

Senator SNOWE. Okay. That is a good point, a very good point 

and observation. Thank you. 

Chair LANDRIEU. Jere, I want to ask you. As you know, we have raised the limits from $100,000 to $150,000, and then from, what 

is it, up to a million, from $750,000 to a million. I understand that 

you all are concerned if we raise those award amounts even higher 

because you want to make sure that this SBIR funding gets spread 

to really small businesses and start ups. But given the testimony 

here, how would you comment about that—sometimes it takes 

more money to put an application for $150,000 together than the 

$150,000 award? 

Mr. GLOVER. I think we need to make sure the application process is simple and clean and consistent across the agencies. It 

should not cost more. But when you increase the size of the 

awards, you crowd out other opportunities, other technologies, and 

other people. To do that, you must do it very carefully. This program was designed to meet the early market niche where no money 

is available. 

Venture capitalists do not look at technologies that are basically 

being funded under the SBIR program. Once you get through the 

program, they may look at it, but the first SBIR you win or the 
99 

first Phase 2 you win, no venture capitalist is going to be looking 

at that technology. This is money that no one else offers. And when 

Roland Tibbetts set this program up, he was very specific that we 

needed to fill that early stage niche, and that niche is worse and 

deeper now than it has ever been. Venture capitalists have pulled 

out of the early and seed stage business. Look at the numbers. 

They are way down. There is nobody playing in this niche except 

SBIR. You raise the side of awards, you crowd out other companies 

and opportunities and you crowd out the have-not States. 

Chair LANDRIEU. And what do you think? I’m pressing you a little on this. What do you think about the waiver idea, though, if it 

is very limited, targeted, but available? 

Mr. GLOVER. It was in the law, and SBA gave NIH a blanket 

waiver and you saw the award size shoot up. So only if it is really 

careful and really monitored. I would limit it to one or two awards 

per agency per year. Let the head of the agency pick what is really 

important to him, what he thinks is best. Make it a competition. 

Do not allow it just to be one, I am sorry, bureaucrat at SBA who 

has a bad moment and grants a blanket waiver and then you see 

ten years of increased awards and you see the number of applicants go down because the chance of winning went down. 

Chair LANDRIEU. Dr. Silver. 

Dr. SILVER. A very quick point to make. I would agree, for the 

most part. I would just make one point, is that there is a difference 

between different kinds of technologies and what the funding is 

going to get. And if you have got funding, $150,000 for a software 

project, you can get pretty far along. For a biotech project, if you 

are a completely new company, you are not going to even be able 

to start. So if there is concern of crowding out with the blanket 

higher level, I would say look at the different technologies, figure 

out what is actually needed to prove feasibility for a given technology. 

Chair LANDRIEU. Jere, what do you say about that? 

Mr. GLOVER. I think you still come down to the situation where 

the SBIR program is not going to be—it never intended to fund the 

entire drug development process for a drug. Five, six hundred million dollars necessary to get a drug approved. The whole SBIR 

budget at NIH would not do one. So it just cannot do it. We want 

to get as many technologies as far along as we can. It is just that 

simple. We cannot simply pick a few winners. The government is 

not real good at that. 

Chair LANDRIEU. Okay. 

Mr. GLOVER. We pick 100 winners, we will get a few really successes. 

Chair LANDRIEU. Dr. Wessner. 

Dr. WESSNER. Well, I was—initially, I wanted to agree. I think 

the standard award size at $150,000 and $1 million makes a lot of 

sense and it simply restores it closely to where it was at the origin, 

discounting for 20 years of inflation. So that is a good place to be. 

But we would argue strongly for the flexibility that we discussed 

earlier. I do not think—well, I do not think any of us in this room 

can make those judgments. That is what program managers and 

the selection committees are for. I do think they should justify it 

if they make it harder. I think we should allow, as we do, to make 
100 

much smaller awards. The Department of Agriculture and EPA 

make really small awards, and they are comfortable doing that. 

That—remember my original testimony. That is why this program 

works, is because we do not try and tell them what to do. It is not 

a French program that is centrally directed from this room. It 

works because it works differently everywhere. 

They should be held accountable. We do want to know what they 

are doing and why, and they should be able to justify that. But the 

decision should stay out there or I think we are in trouble. 

And I would also respectfully say, I do not think the problem is 

as big as it has been painted sometimes. I mean, NIH has made 

some larger awards. No one complains when the Navy is adding 

SBIR funds and they are getting procurement funds to actually deliver something to a warfighter. We do not want to tie their hands 

on that. So I would ask them to report, ask them to defend and 

justify it, but let them do what they think they need to do. 

Chair LANDRIEU. Well, this has been excellent. I am sorry I have 

to bring this hearing to a close, but it really has been an excellent 

discussion of one of the most exciting and innovative programs of 

the Federal Government. As Chair of this committee, I intend to 

do everything I can to push for its passage, literally in the next few 

weeks on the Senate side, and then get it over to the House and 

try to get it to the President before summertime. That is our goal 

and we are going to see what we can do to get it done. 

Thank you very much. The record will stay open for two weeks, 

as usual practice. 

The hearing is adjourned. 

[Whereupon, at 11:47 a.m., the committee was adjourned.] 
(101) 

APPENDIX MATERIAL SUBMITTED 
102 

February 17, 2011 

Senator Kelly A. Ayotte: Statement for the Record 

Senate Small Business and Entrepreneurship Committee Hearing 

"The Reauthorization of the SBIR and STIR Programs" 

I would like to thank Chairwoman Landrieu and Ranking Member Snowe for addressing issues 

important to our nation's entrepreneurs and small businesses. I am excited to get to work with my 

colleagues on the Senate Small Business and Entrepreneurship Committee where I will continue to 

advocate for entrepreneurs and small business owners who playa vital role in ensuring that New 

Hampshite has a vibrant economy. 

I came to Washington knowing that hard-working American small business owners create 

sustainable jobs and stimulate the economy. I understand that because I come from a small 

busincss family. My husband Joe, an Iraq veteran, started a snow plowing and landscaping business 

in southern New Hampshite. We took our savings and relied on credit to get his business off the 

ground. My husband worked hard to launch his business, and I know how proud he is to have 

grown it from two employees to 20 workers. 

I am pleased that the first hearing in the Small Business Committee in the 112th Congress is on the 

reauthorization of the Small Business Innovation Research (SBIR) Program. A Former New 

Hampshite Senator, Warren Rudman, created the SBIR program through legislation in 1982, 

bringing commonsense Granite State ingenuity to generate small businesses growth. 

The SBIR program seeks to increase participation of small innovative technology companies in 

federally funded research and development. SBIR is a tremendous boost to New Hampshite small 

technology firms on the cutting edge of technological and scientific innovation. Since its inception, 

New Hampshire firms have received over 900 awards totaling $325 million in research grants 

through the SBIR program, and over the last two years, New Hampshite firms received 75 awards 

totaling $26 million in grants through SBIR. 

I look forward to working with my colleagues on the Small Business Committee toward 

reauthorization of the SBIR program, and to lower taxes of small business owners and reduce 

burdensome regulations that make it difficult for small business to succeed. 
103 

Opening Statement of Senator Scott Brown 

February 17, 2011 

Small Business Committee 

"Reauthorization of the SBIR and STTR Programs" 

*** 

Thank you Chairwoman Landrieu and Ranking Member Snowe for 

scheduling this morning's hearing on a program that I believe is crucially 

important to the health of small businesses. I would also like to thank Dr. Matt 

Silver, Co-Founder and President of Cambrian Innovation from Somerville, 

Massachusetts, for serving as a witness in our proceedings today, as well as 

Ch!rlrwoman Landrieu and Ranking Member Snowe for generously providing the 

opportunity for a voice from the small business community in Massachusetts. As a 

new member of the Small Business Committee, I am proud to be a part of these 

proceedings. I look forward to participating in future discussions with my fellow 

Committee members on an issue that I find to be central to our ability to move 

forward in this economic climate-protecting and promoting small business. 

As a small business owner myself for many years and a long-standing 

member of many local Chambers of Commerce, I believe that Massachusetts' 

small businesses are the economic engine of our state, and have an extraordinary 

potential to grow, expand, and hire. The SBIR and STTR programs help promote 

the small and growing businesses that take risks, providing the building blocks to 

economic recovery. The compromise reauthorization has been under development 

and negotiation for many years and I applaud the Chair and Ranking member on 

their efforts. 

Massachusetts is widely regarded as one of the most successful incubators 

for innovation in biotechnology, and one such success story is here with us today. 

With over ten years of experience in innovation strategy and technology 

commercialization, Dr. Matt Silver co-founded Intelligent Action Inc. and worked 

as a consultant to industry on early-stage innovation prior to co-founding his 

present firm, Cambrian Innovation. Dr. Silver's testimony today serves as a 

reminder that government can and must playa limited, but unique role in 

supporting small business-rather than looking for the fast dollar, we should be 

looking for sustainability, long-term job creation, and lasting innovation. Thanks 

to the SBIR program, we have done just that with Cambrian Innovation. 

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As I continue to visit and tour businesses in Massachusetts, I am struck by 

the genuine plea to be a guardian for small business owners and protect jobs. I 

believe that the SBIR and STTR programs act as that incubator for innovative 

businesses across the country, and I am enthusiastic to see a full reauthorization of 

these programs in this Congress. 

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patients in need, and American economic competitiveness in the global economy. 

This is exactly the intent of the SBIR program, as created in 1982. 

The SBIRISTTR reauthorization represents a compromise between competing 

approaches to ensure America's small businesses remain at the forefront of global 

innovation. The bill recognizes that the Small Business Innovation Research (SBIR) 

Program - last reauthorized in 2000 - plays an important role in the development of 

new breakthrough therapies to improve human health, and must be updated to reflect 

the new realities facing America's smail businesses in the 21 st Century. 

For these reasons, I hope the Senate will pass the SBIRISTTR Reauthorization 

Act of 20 10 prior to adjouring. 

cc: Senator Mary Landrieu 

Sincerely, 

James C. Greenwood 

President and CEO 

Biotechnology Industry Organization 

Chair, Senate Committee on Small Business and Entrepreneurship 

Senator Olympia Snowe 

Ranking Member, Senate Committee on Small Business and Entrepreneurship 
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